The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2020 third quarter.
Third Quarter 2020 Financial Results
- Net income of $1.2 million, or $0.06 per diluted share,
compared to a net loss of $4.6 million, or $(0.23) per diluted
share, for the 2019 third quarter
- Homes sales revenue of $117.4 million as compared to $118.8
million for the 2019 third quarter
- New home deliveries of 157 as compared to 124 in the 2019 third
quarter, a 27% increase
- Home sales gross margin of 14.2% as compared to 9.5% for the
2019 third quarter
- A 320 basis point improvement over the 2019 third quarter gross
margin of 11.0%* excluding $1.7 million of impairments
- Net new orders of 251 as compared to 124 in the 2019 third
quarter, a 102% increase
- Monthly sales absorption of 3.5 per community as compared to
2.0 per community in the 2019 third quarter, a 75% increase
- Homes in backlog of 329 homes as compared to 207 homes at the
end of the 2019 third quarter, a 59% increase
- Cash flow from operations of $40.0 million and cash and cash
equivalents of $126.4 million as of September 30, 2020
- Debt-to-capital ratio of 59.4% and a net debt-to-capital ratio
of 45.1%*, a 980 basis point improvement from the 2019 third
quarter
"The New Home Company made significant progress during the third
quarter through strong sales, improved gross margins and solid
operating cash flows," remarked Larry Webb, Executive Chairman of
The New Home Company. "We experienced strong monthly sequential
order growth during the quarter with September generating the
highest monthly order total in our Company’s history. Our monthly
sales absorption rate for the quarter was up 75% to 3.5 homes per
community, with our Arizona operation leading the way at a sales
absorption rate of 4.1 homes per community driven by seven recently
opened communities. We expect these new communities to begin
contributing to our profitability in the fourth quarter and have a
meaningful impact on gross margin thereafter. The 102% increase in
third quarter net orders also led to a 59% increase in our ending
backlog and has set us up for a solid finish to the year.”
“Our expansion into more affordably priced communities has been
a key driver for gross margin improvement in the third quarter, and
we see similar margins for homes in our backlog,” added Leonard
Miller, President and Chief Executive Officer. “Faster inventory
turns and price increases at nearly all of our communities
contributed to higher gross margins, especially at our more
affordably priced communities. This margin growth coupled with $40
million in operating cash flow and a 45.1% net debt-to-capital
ratio at the end the quarter provides us with a strong foundation
moving forward.”
Mr. Miller concluded, “We made further progress in strengthening
our balance sheet in October through the issuance of $250 million
of new 7.25% senior unsecured notes due 2025 to fund, together with
cash on hand, the redemption of all of the Company’s existing
senior notes due 2022. We also entered into a new $60 million
unsecured credit facility due April 2023. The refinance of our
senior notes and our new credit facility extend our debt maturity
profile and give us the flexibility to replenish our land
positions, continue our product offering expansion and improve our
operating results. With stronger operations and longer-term capital
to reinvest in our land pipeline, we are optimistic about the
future of The New Home Company and our ability to generate positive
shareholder value.”
Third Quarter 2020 Operating Results
Total revenues for the 2020 third quarter were $130.8 million
compared to $165.6 million in the prior year period, including
$24.6 million of land sales revenue in the 2019 third quarter.
During the 2020 third quarter, the Company generated pretax income
of $1.5 million compared to a $4.8 million pretax loss in the prior
year period. The 2019 third quarter included aggregate charges of
$5.1 million, which consisted of $1.7 million of inventory
impairment charges related to homes sales and $3.4 million of
charges related to land sales during the 2019 third quarter. Net
income attributable to the Company for the 2020 third quarter was
$1.2 million, or $0.06 per diluted share, compared to a net loss of
$4.6 million, or ($0.23) per diluted share, in the prior year
period.
Wholly Owned Projects
Net new home orders for the 2020 third quarter were 251 as
compared to 124 in the prior year which represented a 102%
increase. The significant increase was driven by a 75% improvement
in our monthly sales absorption rate to 3.5 per community as
compared to 2.0 per community in the prior year period.
Cancellation rate for the 2020 third quarter was 6% as compared to
11% in the prior year. We ended the 2020 third quarter with 25
active selling communities, a 14% increase compared to the prior
year.
Homes in backlog totaled 329 at the end of the 2020 third
quarter, a 59% increase compared to the 2019 third quarter. The
dollar value of homes in backlog increased 11% to $207.1 million
compared to $185.8 million. The average selling price of homes in
backlog decreased to $630,000 from $897,000 a year ago as we
continue to expand our product portfolio to include more affordably
priced communities.
Home sales revenue for the 2020 third quarter was approximately
$117.4 million, as compared to $118.8 million for the 2019 third
quarter. The slight year-over-year decrease in home sales revenue
was largely the result of a 22% decrease in average selling price
driven by our strategic shift to more-affordable product, which was
partially offset by a 27% increase in new home deliveries. The
increase in new home deliveries resulted from a higher number of
homes in backlog at the beginning of the 2020 third quarter coupled
with a higher backlog conversion rate of 67% for the 2020 third
quarter, as compared to 60% for the 2019 third quarter. The average
sales price of our home deliveries for the 2020 third quarter was
approximately $748,000, as compared to $958,000 for the 2019 third
quarter.
Gross margin from home sales for the 2020 third quarter was
14.2% compared to 9.5% for the prior year period, which included
$1.7 million of home sales inventory impairments for the 2019 third
quarter. Excluding inventory impairment charges in the 2019 third
quarter, the Company's gross margin was 11.0%* in the prior year
period. The 320-basis point improvement before impairments was
primarily due to a product mix shift to more affordable product,
which generally have higher gross margins, and to a lesser extent,
fewer deliveries from lower margin, move-up condominium communities
compared to the 2019 third quarter. These items were partially
offset by a 60 basis point increase in interest costs included in
cost of home sales as a percentage of home sales revenue. Adjusted
homebuilding gross margin, which excludes interest in cost of home
sales and impairment charges, was 20.0%* for the 2020 third quarter
as compared to 16.2%* in the prior year period.
The Company's SG&A expense ratio as a percentage of home
sales revenue for the 2020 third quarter was 12.3% compared to
11.1% in the prior year period. The increase in the SG&A rate
was primarily due to higher commissions, incentive compensation and
professional fees, and to a lesser extent, a $0.3 million decrease
in G&A expenses that were allocated to our fee building segment
as compared to the 2019 third quarter. These items were partially
offset by lower amortization of capitalized model costs.
Fee Building Projects
Fee building revenue for the 2020 third quarter was $13.4
million, compared to $22.3 million in the prior year period. Fee
building gross margin for the 2020 third quarter was 2.0%, or $0.3
million, compared to 2.9%, or $0.6 million, in the prior year
period. The reduction in fee building gross margin was primarily
due to lower fee building activity in Irvine, California.
Unconsolidated Joint Ventures
(JVs)
The Company incurred a joint venture loss of $98,000 during the
2020 third quarter compared to a loss of $63,000 in the prior year
period. The Company’s joint venture activities continue to wind
down. During the quarter, the Company finalized the sale of its
interest in its Bedford land development joint venture and
continued to actively pursue an exit from its Russell Ranch land
development joint venture in Folsom, California.
Interest Expense
The Company expensed $1.1 million of interest costs directly to
interest expense during the 2020 third quarter in accordance with
Accounting Standards Codification 835, as its qualified assets were
less than its qualified debt.
Balance Sheet and Liquidity
The Company generated $40.0 million in operating cash flows
during the 2020 third quarter and ended the quarter with $126.4
million in cash and cash equivalents. During the quarter, the
Company repurchased $5.2 million in principal of its senior notes
at a discount. As of the end of the third quarter, the Company had
no borrowings outstanding under its revolving credit facility and
had $290.3 million in debt outstanding related to its senior notes
due 2022. The Company had a debt-to-capital ratio of 59.4% and a
net debt-to-capital ratio of 45.1%*, a 980 basis point
year-over-year improvement.
On October 28, 2020, the Company completed its sale of $250
million of 7.25% senior notes due October 2025 (the "offering") to
refinance its existing senior notes due April 2022. Net proceeds
from the offering plus $54.4 million of cash on hand were remitted
to the trustee of the senior notes due 2022 and the obligations
under the senior notes due 2022 were satisfied and discharged. In
addition, on October 30, 2020, the Company entered into a new $60
million senior unsecured revolving credit facility. The new
facility replaced the Company’s previous unsecured credit facility
and has substantially similar terms and covenants as the previous
credit facility and has a maturity date of April 30, 2023.
The Company owned or controlled 2,154 lots through its wholly
owned operations, of which 877 lots, or 41%, were controlled
through option contracts.
Guidance
The Company’s current estimate for the 2020 fourth quarter is as
follows:
- Home sales revenue of $115 - $125 million
- Fee building revenue of $5 - $8 million
- Home sales gross margin of 13.8% to 14.2%
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 Monday, November 2, 2020 to review third 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 December 2, 2020 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13711226.
* 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 September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
117,426
$
118,781
$
290,842
$
358,431
Land sales
—
24,573
157
24,573
Fee building, including management
fees
13,418
22,262
70,838
64,209
130,844
165,616
361,837
447,213
Cost of Sales:
Home sales
100,775
105,763
251,713
315,857
Home sales impairments
—
1,700
19,000
1,700
Land sales
—
26,078
157
26,078
Land sales impairment
—
1,900
—
1,900
Fee building
13,150
21,615
69,632
62,653
113,925
157,056
340,502
408,188
Gross Margin:
Home sales
16,651
11,318
20,129
40,874
Land sales
—
(3,405
)
—
(3,405
)
Fee building
268
647
1,206
1,556
16,919
8,560
21,335
39,025
Selling and marketing expenses
(8,056
)
(7,828
)
(21,908
)
(26,190
)
General and administrative expenses
(6,386
)
(5,361
)
(19,301
)
(18,593
)
Equity in net income (loss) of
unconsolidated joint ventures
(98
)
(63
)
(21,997
)
306
Interest expense
(1,099
)
—
(3,088
)
—
Project abandonment (costs) recoveries,
net
33
(10
)
(14,097
)
(29
)
Gain on early extinguishment of debt
191
—
770
969
Other income (expense), net
24
(76
)
179
(352
)
Pretax income (loss)
1,528
(4,778
)
(58,107
)
(4,864
)
(Provision) benefit for income taxes
(390
)
172
26,476
(138
)
Net income (loss)
1,138
(4,606
)
(31,631
)
(5,002
)
Net (income) loss attributable to
non-controlling interest
50
(18
)
50
(37
)
Net income (loss) attributable to The New
Home Company Inc.
$
1,188
$
(4,624
)
$
(31,581
)
$
(5,039
)
Earnings (loss) per share attributable to
The New Home Company Inc.:
Basic
$
0.07
$
(0.23
)
$
(1.68
)
$
(0.25
)
Diluted
$
0.06
$
(0.23
)
$
(1.68
)
$
(0.25
)
Weighted average shares outstanding:
Basic
18,231,954
20,096,969
18,839,551
20,051,751
Diluted
18,332,601
20,096,969
18,839,551
20,051,751
CONSOLIDATED BALANCE
SHEETS
September 30,
December 31,
2020
2019
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
126,375
$
79,314
Restricted cash
408
117
Contracts and accounts receivable
9,288
15,982
Due from affiliates
114
238
Real estate inventories
341,207
433,938
Investment in and advances to
unconsolidated joint ventures
5,957
30,217
Deferred tax asset, net
16,222
17,503
Other assets
46,769
25,880
Total assets
$
546,340
$
603,189
Liabilities and equity
Accounts payable
$
17,596
$
25,044
Accrued expenses and other liabilities
39,777
40,554
Senior notes, net
290,272
304,832
Total liabilities
347,645
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 September 30, 2020 and December 31, 2019,
respectively
182
201
Additional paid-in capital
191,510
193,862
Retained earnings
7,003
38,584
Total stockholders' equity
198,695
232,647
Non-controlling interest in subsidiary
—
112
Total equity
198,695
232,759
Total liabilities and equity
$
546,340
$
603,189
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
2020
2019
(Dollars in thousands)
Operating activities:
Net loss
$
(31,631
)
$
(5,002
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred taxes
1,281
—
Amortization of stock-based
compensation
1,651
1,661
Distributions of earnings from
unconsolidated joint ventures
110
319
Inventory impairments
19,000
3,600
Project abandonment costs
14,097
29
Equity in net (income) loss of
unconsolidated joint ventures
21,997
(306
)
Depreciation and amortization
5,225
7,008
Gain on early extinguishment of debt
(770
)
(969
)
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
6,694
5,714
Due from affiliates
124
790
Real estate inventories
65,816
62,953
Other assets
(31,087
)
(2,390
)
Accounts payable
(7,448
)
(15,832
)
Accrued expenses and other liabilities
(3,043
)
1,016
Net cash provided by operating
activities
62,016
58,591
Investing activities:
Purchases of property and equipment
(259
)
(26
)
Contributions and advances to
unconsolidated joint ventures
(4,362
)
(5,083
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
9,135
6,873
Net cash provided by investing
activities
4,514
1,764
Financing activities:
Borrowings from credit facility
—
40,000
Repayments of credit facility
—
(89,500
)
Repurchases of senior notes
(14,825
)
(10,856
)
Proceeds from note payable
7,036
—
Repayment of note payable
(7,036
)
—
Payment of debt issuance costs
(269
)
—
Non-controlling interest distribution
(62
)
—
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
(19,178
)
(61,886
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
47,352
(1,531
)
Cash, cash equivalents and restricted cash
– beginning of period
79,431
42,542
Cash, cash equivalents and restricted cash
– end of period
$
126,783
$
41,011
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
Three Months Ended September
30,
2020
2019
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California
71
$
55,480
$
781
66
$
63,533
$
963
8
%
(13
)%
(19
)%
Northern California
81
53,709
663
45
40,146
892
80
%
34
%
(26
)%
Arizona
5
8,237
1,647
13
15,102
1,162
(62
)%
(45
)%
42
%
Total
157
$
117,426
$
748
124
$
118,781
$
958
27
%
(1
)%
(22
)%
Nine Months Ended September
30,
2020
2019
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California
189
$
159,937
$
846
218
$
223,660
$
1,026
(13
)%
(28
)%
(18
)%
Northern California
158
104,129
659
126
96,181
763
25
%
8
%
(14
)%
Arizona
20
26,776
1,339
30
38,590
1,286
(33
)%
(31
)%
4
%
Total
367
$
290,842
$
792
374
$
358,431
$
958
(2
)%
(19
)%
(17
)%
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
% Change
2020
2019
% Change
Net New Home Orders:
Southern California
77
68
13
%
214
216
(1
)%
Northern California
105
52
102
%
233
150
55
%
Arizona
69
4
1625
%
100
24
317
%
Total
251
124
102
%
547
390
40
%
Selling Communities at End of
Period:
Southern California
8
11
(27
)%
Northern California
9
9
—
%
Arizona
8
2
300
%
Total
25
22
14
%
Average Selling Communities:
Southern California
8
11
(27
)%
10
12
(17
)%
Northern California
10
8
25
%
10
8
25
%
Arizona
6
2
200
%
3
2
50
%
Total
24
21
14
%
23
22
5
%
Monthly Sales Absorption Rate per
Community (1):
Southern California
3.1
2.1
48
%
2.4
2.0
20
%
Northern California
3.6
2.3
57
%
2.6
2.2
18
%
Arizona
4.1
0.7
486
%
3.2
1.3
146
%
Total
3.5
2.0
75
%
2.6
2.0
30
%
(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 September 30,
2020
2019
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Southern California
97
$
77,214
$
796
88
$
91,538
$
1,040
10
%
(16
)%
(23
)%
Northern California
141
93,336
662
92
64,889
705
53
%
44
%
(6
)%
Arizona
91
36,588
402
27
29,351
1,087
237
%
25
%
(63
)%
Total
329
$
207,138
$
630
207
$
185,778
$
897
59
%
11
%
(30
)%
Lots Owned and Controlled:
As of September 30,
2020
2019
% Change
Lots Owned
Southern California
347
537
(35
)%
Northern California
506
661
(23
)%
Arizona
424
281
51
%
Total
1,277
1,479
(14
)%
Lots Controlled (1)
Southern California
394
482
(18
)%
Northern California
253
490
(48
)%
Arizona
230
477
(52
)%
Total
877
1,449
(39
)%
Lots Owned and Controlled - Wholly
Owned
2,154
2,928
(26
)%
Fee Building Lots (2)
107
1,173
(91
)%
(1)
Includes lots that we control under
purchase and sale agreements or option agreements with
nonrefundable deposits 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
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Interest incurred
$
5,831
$
6,978
$
18,361
$
22,345
Adjusted EBITDA(1)
$
11,629
$
8,570
$
25,004
$
26,516
Adjusted EBITDA margin percentage (1)
8.9
%
5.2
%
6.9
%
5.9
%
LTM(2) Ended September
30,
2020
2019
Interest incurred
$
24,835
$
30,124
Adjusted EBITDA(1)
$
39,918
$
44,933
Adjusted EBITDA margin percentage (1)
6.8
%
6.6
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
1.6x
1.5x
September 30,
December 31,
2020
2019
Ratio of debt-to-capital
59.4
%
56.7
%
Ratio of net debt-to-capital(1)
45.1
%
49.2
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)(3)
7.3x
7.4x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)(3)
4.1x
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 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 September
30,
Nine Months Ended September
30,
2020
2019
% Change
2020
2019
% Change
Financial Data - Unconsolidated Joint
Ventures:
Home sales revenue
$
17,585
$
22,155
(21
)%
$
63,331
$
110,849
(43
)%
Land sales revenue
—
13,654
(100
)%
16,191
26,325
(38
)%
Total revenues
$
17,585
$
35,809
(51
)%
$
79,522
$
137,174
(42
)%
Net income (loss)
$
101
$
(262
)
139
%
$
3,081
$
2,041
51
%
Operating Data - Unconsolidated Joint
Ventures:
New home orders
4
23
(83
)%
19
87
(78
)%
New homes delivered
17
26
(35
)%
67
116
(42
)%
Average selling price of homes
delivered
$
1,034
$
852
21
%
$
945
$
956
(1
)%
Selling communities at end of period
1
4
(75
)%
Backlog homes (dollar value)
$
1,850
$
44,351
(96
)%
Backlog (homes)
1
47
(98
)%
Average sales price of backlog
$
1,850
$
944
96
%
Homebuilding lots owned and controlled
7
95
(93
)%
Land development lots owned and
controlled
634
1,846
(66
)%
Total lots owned and controlled
641
1,941
(67
)%
(1)
Land sales revenue for the nine months
ended September 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 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 September
30,
Nine Months Ended September
30,
2020
%
2019
%
2020
%
2019
%
(Dollars in thousands)
Home sales revenue
$
117,426
100.0
%
$
118,781
100.0
%
$
290,842
100.0
%
$
358,431
100.0
%
Cost of home sales
100,775
85.8
%
107,463
90.5
%
270,713
93.1
%
317,557
88.6
%
Homebuilding gross margin
16,651
14.2
%
11,318
9.5
%
20,129
6.9
%
40,874
11.4
%
Add: Home sales impairment
—
0.0
%
1,700
1.5
%
19,000
6.6
%
1,700
0.5
%
Homebuilding gross margin before
impairments
16,651
14.2
%
13,018
11.0
%
39,129
13.5
%
42,574
11.9
%
Add: Interest in cost of home sales
6,875
5.8
%
6,167
5.2
%
17,622
6.0
%
17,320
4.8
%
Adjusted homebuilding gross margin
$
23,526
20.0
%
$
19,185
16.2
%
$
56,751
19.5
%
$
59,894
16.7
%
The following table reconciles the Company’s ratio of
debt-to-capital to the non-GAAP ratio of net debt-to-capital. We
believe that the ratio of net debt-to-capital is a relevant
financial measure for management and investors to understand the
leverage employed in our operations and as an indicator of the
Company’s ability to obtain financing.
September 30,
December 31,
2020
2019
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
290,272
$
304,832
Equity, exclusive of non-controlling
interest
198,695
232,647
Total capital
$
488,967
$
537,479
Ratio of debt-to-capital(1)
59.4
%
56.7
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
290,272
$
304,832
Less: Cash, cash equivalents and
restricted cash
126,783
79,431
Net debt
163,489
225,401
Equity, exclusive of non-controlling
interest
198,695
232,647
Total capital
$
362,184
$
458,048
Ratio of net debt-to-capital(2)
45.1
%
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
Nine Months Ended
LTM(1) Ended
December
September 30,
September 30,
September 30,
31,
2020
2019
2020
2019
2020
2019
2019
(Dollars in thousands)
Net income (loss)
$
1,138
$
(4,606
)
$
(31,631
)
$
(5,002
)
$
(34,630
)
$
(21,152
)
$
(8,001
)
Add:
Interest amortized to cost of sales
excluding impairment charges, and interest expensed (2)
7,974
7,097
20,710
18,250
29,694
26,118
27,234
Provision (benefit) for income taxes
390
(172
)
(26,476
)
138
(30,429
)
(6,088
)
(3,815
)
Depreciation and amortization
1,602
1,966
5,225
7,008
7,174
9,142
8,957
Amortization of stock-based
compensation
541
572
1,651
1,661
2,250
2,425
2,260
Cash distributions of income from
unconsolidated joint ventures
110
40
110
319
165
319
374
Severance charges
—
—
1,091
1,788
1,091
1,788
1,788
Noncash inventory impairments and
abandonments
(33
)
3,610
33,097
3,629
39,762
13,754
10,294
Less:
Gain on early extinguishment of debt
(191
)
—
(770
)
(969
)
(965
)
(969
)
(1,164
)
Equity in net (income) loss of
unconsolidated joint ventures
98
63
21,997
(306
)
25,806
19,596
3,503
Adjusted EBITDA
$
11,629
$
8,570
$
25,004
$
26,516
$
39,918
$
44,933
$
41,430
Total Revenue
$
130,844
$
165,616
$
361,837
$
447,213
$
583,973
$
676,879
$
669,349
Adjusted EBITDA margin percentage
8.9
%
5.2
%
6.9
%
5.9
%
6.8
%
6.6
%
6.2
%
Interest incurred
$
5,831
$
6,978
$
18,361
$
22,345
$
24,835
$
30,124
$
28,819
Ratio of Adjusted EBITDA to total interest
incurred
2.0x
1.2x
1.4x
1.2x
1.6x
1.5x
1.4x
Total debt at period end
$
290,272
$
327,421
$
304,832
Ratio of debt to Adjusted EBITDA
7.3x
7.3x
7.4x
Total net debt at period end
$
163,489
$
286,410
$
225,401
Ratio of net debt to Adjusted EBITDA
4.1x
6.4x
5.4x
Total cash and inventory
$
467,582
$
547,190
$
513,252
Ratio of cash and inventory to debt
1.6x
1.7x
1.7x
(1)
"LTM" indicates amounts for the trailing
12 months.
(2)
Due to an inadvertent oversight in the
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 year period has been restated to correct
this duplication.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201102005267/en/
Investor Relations Drew Mackintosh 949-382-7838
investorrelations@nwhm.com
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