The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2020 fourth quarter and full year.
Fourth Quarter 2020 Financial Results
- Net orders up 89%, monthly sales absorption rate increased 68%
to 3.7 compared to 2.2 in the prior year
- Unit backlog up 175%, dollar value of homes in backlog
increased 88% compared to last year to $236.0 million
- Total revenues of $145.6 million and home sales revenue of
$135.4 million
- Homebuilding gross margin of 14.8% compared to 7.8% in the
prior year, including impairments in prior year
- Adjusted gross margin excluding interest in cost of sales and
impairments improved 260 basis points to 19.4%* compared to 16.8%*
in the prior year
- Net loss of $1.2 million, or $(0.07) per diluted share,
including an $8.0 million debt refinance charge
- Adjusted net income of $4.8 million*, or $0.26 per diluted
share*, excluding the debt refinance charge
- Ending cash balance of $107.3 million, a $28.0 million increase
compared to end of 2019
- Debt-to-capital ratio of 55.4% and a net debt-to-capital ratio
of 41.0%*, an 820-basis point improvement from the end of 2019
"The New Home Company finished the year on a strong note with
solid progress across many key operating metrics during the fourth
quarter," stated Larry Webb, Executive Chairman of The New Home
Company. "Robust demand for new housing resulted in an 89% increase
in net new orders, while strong pricing power resulted in a
260-basis point* improvement in adjusted gross margins during the
fourth quarter. Excluding a one-time debt refinance charge, the
company generated adjusted net income of $4.8 million*, or $0.26
per diluted share*, while generating $31 million of operating cash
flow. We ended the year with a net-debt-to-capital ratio of 41.0%,
an 820 basis point improvement from a year ago."
Leonard Miller, President and Chief Executive Officer, stated,
"We enter 2021 on solid footing with the number of homes in backlog
up 175% as compared to the end of 2019. We continue to see strong
demand across all our markets as December was the highest order
month in the history of the Company and the trend continued into
January as net orders increased 109% compared to January 2020
driven by a 4.5 monthly sales absorption pace. While our affordable
product offerings continue to grow as a percentage of our total
community offerings, new home demand was evident across all product
segments. The faster sales pace combined with meaningful price
increases at nearly all of our communities has driven gross margin
improvement that we expect to continue into 2021."
Mr. Miller concluded, "We substantially improved our financial
condition in the fourth quarter through the successful refinance of
our Senior Notes, the extension of our revolving credit facility
and by unwinding our position in a capital intensive joint venture.
Moving forward, we look to execute a balanced approach of acquiring
new land positions and improving our operating metrics to generate
positive shareholder returns as we head into 2021. I am excited
about the future of The New Home Company and look forward to
building on the momentum we established in 2020."
Fourth Quarter 2020 Operating Results
Total revenues for the 2020 fourth quarter were $145.6 million,
compared to $222.1 million in the prior year period. Net loss
attributable to the Company for the fourth quarter was $1.2
million, or $(0.07) per diluted share, compared to a net loss of
$3.0 million, or $(0.15) per diluted share, in the prior year
period. The 2020 fourth quarter results included a pretax charge of
$8.0 million related to the refinance of the Company’s senior notes
in October 2020 and the 2019 fourth quarter included $10.1 million
of pretax inventory and joint venture impairment charges. Adjusted
net income for the 2020 fourth quarter was $4.8 million*, or $0.26
per diluted share*, excluding the refinance charge compared to
adjusted net income for the 2019 fourth quarter of $3.1 million*,
or $0.15 per diluted share*, excluding the inventory and joint
venture impairment charges.
Wholly Owned Projects
Net new home orders for the 2020 fourth quarter increased 89%
year-over-year, primarily due to improved monthly sales absorption
rates, and to a lesser extent, a slight increase in average selling
communities. The monthly sales absorption rate for the 2020 fourth
quarter was up 68% to 3.7 compared to 2.2 for the prior year
period. We ended the 2020 fourth quarter with 23 active
communities, up from 21 at the end of the 2019 fourth quarter.
The Company's wholly owned backlog at the end of the 2020 fourth
quarter increased 175% to 410 homes compared to 149 homes for the
prior year period. The increase in backlog units was driven
primarily by the increase in net new orders coupled with a lower
backlog conversion rate for the 2020 fourth quarter. Our backlog
conversion rate was 57% for the 2020 fourth quarter as compared to
97% in the year ago period. The decrease in the 2020 conversion
rate resulted from fewer homes sold and delivered during the
quarter as a result of fewer completed spec homes available to
sell, coupled with a higher beginning backlog to start the 2020
fourth quarter. The dollar value of the Company's wholly owned
backlog rose 88% to $236.0 million driven by the increase in units,
which was partially offset by a 32% decrease in the average selling
price of homes in backlog to $576,000 as the Company continues to
diversify its product offerings, including its expansion into more
affordable communities in Arizona.
Home sales revenue for the 2020 fourth quarter was $135.4
million compared to $173.9 million in the 2019 fourth quarter. The
22% decrease in home sales revenue was driven by a 17% decline in
average selling price to $720,000 from $870,000 for the 2019 fourth
quarter and a 6% decrease in home deliveries. The lower
year-over-year average selling price is consistent with the
Company's strategic shift to more affordable product in all our
markets, and particularly in Arizona where the 2020 fourth quarter
average home price decreased 40% as we delivered the first homes at
our more affordable communities during the fourth quarter.
Gross margin from home sales for the 2020 fourth quarter was
14.8% compared to 7.8% in the 2019 fourth quarter. Excluding $6.6
million of inventory impairment charges, the 2019 fourth quarter
gross margin was 11.6%*. Adjusted homebuilding gross margin, which
excludes home sales impairment charges and interest in cost of home
sales, was 19.4%* for the 2020 fourth quarter as compared to 16.8%*
in the prior year period. The improvement in gross margin was
primarily due to better pricing power and a mix shift.
The Company's SG&A expense ratio as a percentage of home
sales revenue for the 2020 fourth quarter was 12.0% compared to
9.9% in the 2019 fourth quarter. The increase in rate was primarily
due to the 22% reduction of home sales revenue and a $0.4 million
reduction in the amount of G&A expenses allocated to fee
building cost of sales in the 2020 fourth quarter as compared to
the prior year period due to lower fee building and joint venture
activity, and to a lesser extent, an increase in broker
commissions.
Fee Building Projects
Fee building revenue for the 2020 fourth quarter was $10.2
million, compared to $31.1 million in the prior year period. The
decrease in fee building revenue was largely due to the wind down
of our fee building arrangement with Irvine Pacific. This decrease
was partially offset by $2.2 million in fee revenue earned at our
new Atlas fee building project at Great Park in Irvine, CA.
Unconsolidated Joint Ventures
(JVs)
The Company recognized $3.2 million of income from joint
ventures in the 2020 fourth quarter compared to a $3.8 million loss
for the prior year period. Included in joint venture income for the
2020 fourth quarter was $4.5 million of income attributable to the
Company related to the sale of the remaining lots at the Russell
Ranch land development joint venture in Folsom, CA.
Balance Sheet and Liquidity
The Company generated $31.1 million in operating cash flows
during the 2020 fourth quarter and ended the quarter with $107.3
million in cash, and $244.9 million in debt. At December 31, 2020,
the Company had a debt-to-capital ratio of 55.4% and a net
debt-to-capital ratio of 41.0%*. As of December 31, 2020, the
Company owned or controlled 2,018 lots through its wholly owned
operations, of which 34% lots were controlled through option
contracts.
Share Repurchases
During the 2020 fourth quarter, the Company repurchased 109,609
shares of common stock for an aggregate value of $560,000. As of
the end of the fourth quarter, the Company had a remaining purchase
authorization of $9.4 million of its $10 million authorized stock
repurchase program.
Guidance
The Company's current estimate for the 2021 first quarter is as
follows:
- Home sales revenue of $80 - $85 million
- Fee building revenue of $4 - $6 million
- Home sales gross margin of 16.5% - 17.0%
The Company's current estimate for the 2021 full year is as
follows:
- Home sales revenue of $410 - $440 million
- Fee building revenue of $15 - $20 million
- Home sales gross margin of 15.5% - 16.0%
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 11:00 a.m.
Eastern Time on Thursday, February 11, 2021 to review fourth
quarter and full year results, discuss recent events, and discuss
the Company's quarterly and full year guidance for 2021. We will
also conduct a question-and-answer period. The conference call will
be available in the Investors section of the Company’s website at
www.NWHM.com. To listen to the broadcast live, go to the site
approximately 15 minutes prior to the scheduled start time in order
to register, download and install any necessary audio software. To
participate in the telephone conference call, dial 1-877-407-0789
(domestic) or 1-201-689-8562 (international) at least five minutes
prior to the start time. Replays of the conference call will be
available through March 13, 2021 and can be accessed by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the pass code 13715475.
* Net debt-to-capital ratio, adjusted net income, adjusted EPS,
home sales gross margin excluding impairment charges (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 Irvine, 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. 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 December
31,
Year Ended December
31,
2020
2019
2020
2019
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
135,409
$
173,921
$
426,251
$
532,352
Land sales
—
17,091
157
41,664
Fee building, including management
fees
10,165
31,124
81,003
95,333
145,574
222,136
507,411
669,349
Cost of Sales:
Home sales
115,313
153,700
367,026
469,557
Home sales impairments
—
6,600
19,000
8,300
Land sales
—
17,091
157
43,169
Land sales impairment
—
—
—
1,900
Fee building
9,951
30,628
79,583
93,281
125,264
208,019
465,766
616,207
Gross Margin:
Home sales
20,096
13,621
40,225
54,495
Land sales
—
—
—
(3,405
)
Fee building
214
496
1,420
2,052
20,310
14,117
41,645
53,142
Selling and marketing expenses
(8,869
)
(10,167
)
(30,777
)
(36,357
)
General and administrative expenses
(7,398
)
(7,130
)
(26,699
)
(25,723
)
Equity in net income (loss) of
unconsolidated joint ventures
3,206
(3,809
)
(18,791
)
(3,503
)
Interest expense
(567
)
—
(3,655
)
—
Project abandonment costs
(1
)
(65
)
(14,098
)
(94
)
Gain (loss) on early extinguishment of
debt
(8,024
)
195
(7,254
)
1,164
Other income (expense), net
(6
)
(93
)
173
(445
)
Pretax loss
(1,349
)
(6,952
)
(59,456
)
(11,816
)
Benefit for income taxes
111
3,953
26,587
3,815
Net loss
(1,238
)
(2,999
)
(32,869
)
(8,001
)
Net (income) loss attributable to
non-controlling interest
—
1
50
(36
)
Net loss attributable to The New Home
Company Inc.
$
(1,238
)
$
(2,998
)
$
(32,819
)
$
(8,037
)
Loss per share attributable to The New
Home Company Inc.:
Basic
$
(0.07
)
$
(0.15
)
$
(1.76
)
$
(0.40
)
Diluted
$
(0.07
)
$
(0.15
)
$
(1.76
)
$
(0.40
)
Weighted average shares outstanding:
Basic
18,208,766
20,096,969
18,680,993
20,063,148
Diluted
18,208,766
20,096,969
18,680,993
20,063,148
CONSOLIDATED BALANCE
SHEETS
December 31,
December 31,
2020
2019
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
107,279
$
79,314
Restricted cash
180
117
Contracts and accounts receivable
4,924
15,982
Due from affiliates
102
238
Real estate inventories
314,957
433,938
Investment in and advances to
unconsolidated joint ventures
2,107
30,217
Deferred tax asset, net
15,447
17,503
Other assets
50,703
25,880
Total assets
$
495,699
$
603,189
Liabilities and equity
Accounts payable
$
17,182
$
25,044
Accrued expenses and other liabilities
36,210
40,554
Senior notes, net
244,865
304,832
Total liabilities
298,257
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, 18,122,345 and 20,096,969, shares issued and
outstanding as of December 31, 2020 and December 31, 2019,
respectively
181
201
Additional paid-in capital
191,496
193,862
Retained earnings
5,765
38,584
Total stockholders' equity
197,442
232,647
Non-controlling interest in subsidiary
—
112
Total equity
197,442
232,759
Total liabilities and equity
$
495,699
$
603,189
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Year Ended
December 31,
2020
2019
(Dollars in thousands)
Operating activities:
Net loss
$
(32,869
)
$
(8,001
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Deferred taxes
2,056
(3,566
)
Amortization of stock-based
compensation
2,197
2,260
Distributions of earnings from
unconsolidated joint ventures
110
374
Inventory impairments
19,000
10,200
Project abandonment costs
14,098
94
Equity in net (income) loss of
unconsolidated joint ventures
18,791
3,503
Depreciation and amortization
6,721
8,957
Gain on early extinguishment of debt
7,254
(1,164
)
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
11,058
2,283
Due from affiliates
136
930
Real estate inventories
85,200
123,239
Other assets
(35,357
)
(2,326
)
Accounts payable
(7,862
)
(14,347
)
Accrued expenses and other liabilities
2,549
(1,178
)
Net cash provided by operating
activities
93,082
121,258
Investing activities:
Purchases of property and equipment
(291
)
(41
)
Contributions and advances to
unconsolidated joint ventures
(4,995
)
(8,826
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
14,257
9,133
Net cash provided by investing
activities
8,971
266
Financing activities:
Borrowings from credit facility
—
50,000
Repayments of credit facility
—
(117,500
)
Repurchases of senior notes
(312,410
)
(15,605
)
Proceeds from senior notes
250,000
—
Proceeds from note payable
7,036
—
Repayment of note payable
(7,036
)
—
Payment of debt issuance costs
(6,970
)
—
Non-controlling interest distribution
(62
)
—
Repurchases of common stock
(4,279
)
(1,042
)
Tax withholding paid on behalf of
employees for stock awards
(304
)
(488
)
Net cash used in financing activities
(74,025
)
(84,635
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
28,028
36,889
Cash, cash equivalents and restricted cash
– beginning of period
79,431
42,542
Cash, cash equivalents and restricted cash
– end of period
$
107,459
$
79,431
KEY FINANCIAL AND OPERATING DATA
(Dollars in thousands) (Unaudited)
New Home Deliveries:
Three Months Ended December
31,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
73
$
60,414
$
828
88
$
88,750
$
1,009
(17
)%
(32
)%
(18
)%
Northern California
89
59,056
664
91
63,651
699
(2
)%
(7
)%
(5
)%
Arizona
26
15,939
613
21
21,520
1,025
24
%
(26
)%
(40
)%
Total
188
$
135,409
$
720
200
$
173,921
$
870
(6
)%
(22
)%
(17
)%
Year Ended December
31,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
262
$
220,351
$
841
306
$
312,410
$
1,021
(14
)%
(29
)%
(18
)%
Northern California
247
163,185
661
217
159,832
737
14
%
2
%
(10
)%
Arizona
46
42,715
929
51
60,110
1,179
(10
)%
(29
)%
(21
)%
Total
555
$
426,251
$
768
574
$
532,352
$
927
(3
)%
(20
)%
(17
)%
Three Months Ended December
31,
Year Ended December
31,
2020
2019
% Change
2020
2019
% Change
Net New Home Orders:
Southern California
52
72
(28
)%
266
288
(8
)%
Northern California
120
65
85
%
353
215
64
%
Arizona
97
5
1840
%
197
29
579
%
Total
269
142
89
%
816
532
53
%
Selling Communities at End of
Period:
Southern California
6
10
(40
)%
Northern California
10
9
11
%
Arizona
7
2
250
%
Total
23
21
10
%
Average Selling Communities:
Southern California
7
10
(30
)%
9
11
(18
)%
Northern California
10
9
11
%
10
8
25
%
Arizona
7
2
250
%
4
2
100
%
Total
24
21
14
%
24
21
14
%
Monthly Sales Absorption Rate per
Community (1):
Southern California
2.6
2.3
13
%
2.4
2.1
14
%
Northern California
4.0
2.4
67
%
2.9
2.3
26
%
Arizona
4.4
0.8
450
%
3.7
1.2
208
%
Total
3.7
2.2
68
%
2.9
2.1
38
%
(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 December 31,
2020
2019
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
76
$
55,322
$
728
72
$
69,263
$
962
6
%
(20
)%
(24
)%
Northern California
172
116,594
678
66
41,973
636
161
%
178
%
7
%
Arizona
162
64,075
396
11
14,567
1,324
1373
%
340
%
(70
)%
Total
410
$
235,991
$
576
149
$
125,803
$
844
175
%
88
%
(32
)%
Lots Owned and Controlled:
As of December 31,
2020
2019
% Change
Lots Owned
Southern California
300
501
(40
)%
Northern California
582
682
(15
)%
Arizona
458
395
16
%
Total
1,340
1,578
(15
)%
Lots Controlled (1)
Southern California
376
430
(13
)%
Northern California
132
378
(65
)%
Arizona
170
315
(46
)%
Total
678
1,123
(40
)%
Lots Owned and Controlled - Wholly
Owned
2,018
2,701
(25
)%
Fee Building Lots (2)
54
1,135
(95
)%
________________
(1)
Includes lots that we control
under purchase and sale agreements or option agreements with
refundable and nonrefundable deposits subject to customary
conditions and have not yet closed. There can be no assurance that
such acquisitions will occur. The 170 lots for Arizona at December
31, 2020 exclude 177 lots that were under a purchase and sale
agreement with a refundable deposit, as the Company terminated the
contract in January 2021.
(2)
Lots owned by third party
property owners for which we perform general contracting or
construction management services.
Other Financial Data:
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Interest incurred
$
5,575
$
6,474
$
23,936
$
28,819
Adjusted EBITDA(1)
$
12,321
$
14,914
$
37,325
$
41,430
Adjusted EBITDA margin percentage (1)
8.5
%
6.7
%
7.4
%
6.2
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
2.2.x
2.3x
1.6x
1.4x
December 31,
December 31,
2020
2019
Ratio of debt-to-capital
55.4
%
56.7
%
Ratio of net debt-to-capital(1)
41.0
%
49.2
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)(3)
6.6x
7.4x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)(3)
3.7x
5.4x
Ratio of cash and inventory to debt
1.7x
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 December
31,
Year Ended December
31,
2020
2019
% Change
2020
2019
% Change
Financial Data - Unconsolidated Joint
Ventures:
Home sales revenue
$
10,096
$
18,732
(46
)%
$
73,427
$
129,581
(43
)%
Land sales revenue(1)
48,201
8,132
493
%
64,392
34,457
87
%
Total revenues
$
58,297
$
26,864
117
%
$
137,819
$
164,038
(16
)%
Net loss
$
(27,034
)
$
(68,956
)
61
%
$
(23,953
)
$
(66,915
)
64
%
Operating Data - Unconsolidated Joint
Ventures:
New home orders
6
23
(74
)%
25
110
(77
)%
New homes delivered
5
21
(76
)%
72
137
(47
)%
Average selling price of homes
delivered
$
2,019
$
892
126
%
$
1,020
$
946
8
%
Selling communities at end of period
—
4
(100
)%
Backlog homes (dollar value)
$
4,849
$
42,652
(89
)%
Backlog (homes)
2
49
(96
)%
Average sales price of backlog
$
2,425
$
870
179
%
Homebuilding lots owned and controlled
2
74
(97
)%
Land development lots owned and
controlled
—
1,798
(100
)%
Total lots owned and controlled
2
1,872
(100
)%
(1)
Land sales revenue for the year
ended December 31, 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 loss attributable to the
Company to the non-GAAP measure of adjusted net income attributable
to the Company (net income before inventory impairments, select
abandoned project costs, joint venture impairments, debt refinance
charges, severance charges and loss on land sales) and loss per
share and loss per diluted share attributable to the Company to the
non-GAAP measures of adjusted income per share and adjusted income
per diluted share attributable to the Company (income per share
before inventory impairments, select abandoned project costs, joint
venture impairments, debt refinance charges, severance charges and
loss on land sales). 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 December
31,
Year Ended December
31,
2020
2019
2020
2019
(Dollars in thousands, except per
share amounts)
Net loss attributable to The New Home
Company Inc.
$
(1,238
)
$
(2,998
)
$
(32,819
)
$
(8,037
)
Total impairments and other charges, net
of tax
6,064
6,080
36,422
12,643
Adjusted net income attributable to The
New Home Company Inc.
$
4,826
$
3,082
$
3,603
$
4,606
Loss per share attributable to The New
Home Company Inc.:
Basic
$
(0.07
)
$
(0.15
)
$
(1.76
)
$
(0.40
)
Diluted
$
(0.07
)
$
(0.15
)
$
(1.76
)
$
(0.40
)
Adjusted earnings per share attributable
to The New Home Company Inc.:
Basic
$
0.27
$
0.15
$
0.19
$
0.23
Diluted
$
0.26
$
0.15
$
0.19
$
0.23
Weighted average shares outstanding:
Basic
18,208,766
20,096,969
18,680,993
20,063,148
Diluted
18,500,063
20,202,291
18,799,780
20,120,450
Inventory impairments
$
—
$
6,600
$
19,000
$
10,200
Abandoned project costs related to Arizona
luxury condominium community
—
—
14,000
—
Joint venture impairments
—
3,500
22,325
3,500
Loss related to retirement of 2022
Notes
8,024
—
8,024
—
Severance charges
—
—
1,091
1,788
Loss on land sales
—
—
—
1,505
Less: Related tax benefit
(1,960
)
(4,020
)
$
(28,018
)
(4,350
)
Total impairments and other charges, net
of tax
$
6,064
$
6,080
$
36,422
$
12,643
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 December
31,
Year Ended December
31,
2020
%
2019
%
2020
%
2019
%
(Dollars in thousands)
Home sales revenue
$
135,409
100.0
%
$
173,921
100.0
%
$
426,251
100.0
%
$
532,352
100.0
%
Cost of home sales
115,313
85.2
%
160,300
92.2
%
386,026
90.6
%
477,857
89.8
%
Homebuilding gross margin
20,096
14.8
%
13,621
7.8
%
40,225
9.4
%
54,495
10.2
%
Add: Home sales impairment
—
—
6,600
3.8
%
19,000
4.5
%
8,300
1.6
%
Homebuilding gross margin before
impairments
20,096
14.8
%
20,221
11.6
%
59,225
13.9
%
62,795
11.8
%
Add: Interest in cost of home sales
6,242
4.6
%
8,984
5.2
%
23,864
5.6
%
26,304
4.9
%
Adjusted homebuilding gross margin
$
26,338
19.4
%
$
29,205
16.8
%
$
83,089
19.5
%
$
89,099
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.
December 31,
December 31,
2020
2019
(Dollars in thousands)
Total debt, net of unamortized discount,
premium and debt issuance costs
$
244,865
$
304,832
Equity, exclusive of non-controlling
interest
197,442
232,647
Total capital
$
442,307
$
537,479
Ratio of debt-to-capital(1)
55.4
%
56.7
%
Total debt, net of unamortized discount,
premium and debt issuance costs
$
244,865
$
304,832
Less: Cash, cash equivalents and
restricted cash
107,459
79,431
Net debt
137,406
225,401
Equity, exclusive of non-controlling
interest
197,442
232,647
Total capital
$
334,848
$
458,048
Ratio of net debt-to-capital(2)
41.0
%
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, 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 inventory
impairment charges and abandoned project costs, (f) gain (loss) 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) Year Ended
December 31,
December 31,
2020
2019
2020
2019
(Dollars in thousands)
Net loss
$
(1,238
)
$
(2,999
)
$
(32,869
)
$
(8,001
)
Add:
Interest amortized to cost of sales
excluding impairment charges, and interest expensed (2)
6,809
8,984
27,519
27,234
Provision (benefit) for income taxes
(111
)
(3,953
)
(26,587
)
(3,815
)
Depreciation and amortization
1,496
1,949
6,721
8,957
Amortization of stock-based
compensation
546
599
2,197
2,260
Cash distributions of income from
unconsolidated joint ventures
—
55
110
374
Severance charges
—
—
1,091
1,788
Noncash inventory impairments and
abandonments
1
6,665
33,098
10,294
Less:
(Gain) loss on early extinguishment of
debt
8,024
(195
)
7,254
(1,164
)
Equity in net (income) loss of
unconsolidated joint ventures
(3,206
)
3,809
18,791
3,503
Adjusted EBITDA
$
12,321
$
14,914
$
37,325
$
41,430
Total Revenue
$
145,574
$
222,136
$
507,411
$
669,349
Adjusted EBITDA margin percentage
8.5
%
6.7
%
7.4
%
6.2
%
Interest incurred
$
5,575
$
6,474
$
23,936
$
28,819
Ratio of Adjusted EBITDA to total interest
incurred
2.2.x
2.3x
1.6x
1.4x
Total debt at period end
244,865
304,832
Ratio of debt to Adjusted EBITDA
6.6x
7.4x
Total net debt at period end
137,406
225,401
Ratio of net debt to Adjusted EBITDA
3.7x
5.4x
Total cash and inventory
422,236
513,252
Ratio of cash and inventory to debt
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/20210211005283/en/
Investor Relations Drew Mackintosh 949-382-7838
investorrelations@nwhm.com
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