First Quarter Homebuilding Revenue of $453.8
Million, up 22%; Pre-Tax Income of $20.0 Million, up 30%; New Home
Deliveries of 949 Homes, up 28%; SG&A Percentage of
12.0%
William Lyon Homes (NYSE: WLH), a leading homebuilder in the
Western U.S., announced results for its first quarter ended March
31, 2019.
2019 First Quarter Highlights (Comparison to 2018 First
Quarter)
- Net income available to common
stockholders of $8.1 million, or $0.21 per diluted share, compared
to $8.3 million, or $0.21 per diluted share in the prior year
- Pre-tax income of $20.0 million, up
from $15.4 million in the prior year
- New home deliveries of 949 homes, up
28%
- Home sales revenue of $453.8 million,
up 22%
- Average sales price (ASP) of new homes
delivered of $478,200 versus $503,200
- Homebuilding gross margin percentage of
16.0%
- Net new home orders of 1,103
- Units in backlog of 1,195
- Dollar value of homes in backlog of
$527.2 million
- SG&A percentage of 12.0%, compared
to 12.7%
- Adjusted EBITDA of $36.6 million
- Average sales locations of 118
“The first quarter of 2019 played out generally as we expected,
and reflected a nice rebound from the volatility experienced late
last year, as interest rates have receded and consumer demand has
rebounded against a backdrop of ongoing strength in the broader
economy,” said Matthew R. Zaist, President and Chief Executive
Officer. “One of our objectives coming into the year was to deliver
on our spec inventory, and our operating teams performed well in
converting these homes to sell and close during the quarter. This
represented 41% of our deliveries for the quarter, highlighting the
attractiveness to the entry-level consumer of inventory available
to the needs-based buyer.”
“Overall our backlog conversion rate was 91% for the quarter,
the highest in several years, and yielding 949 new home deliveries,
an increase of 28%, and homebuilding revenues of $453.8 million, up
22% over the prior year. In addition, we had significant
improvement in pre-tax income of 30% year-over-year, and SG&A
leverage was better than our expectations by 100 basis points.”
Mr. Zaist continued, “Net new home orders for the first quarter
were flat compared to last year’s very strong first quarter, and
the order cadence accelerated each month as the quarter progressed.
Our monthly order pace was 2.4 sales per community in January,
improving to 2.9 in February, and picking up meaningfully in March
to 4.1, bringing us back in line with historical norms. We continue
to benefit from our strategy of focusing on the entry-level and
first-time move-up buyer segments, which represent 83% of our
deliveries and our ending backlog, and the highest absorbing
segments for the Company during the quarter.”
Operating Results
Home sales revenue for the first quarter of 2019 was $453.8
million, as compared to $372.4 million in the year-ago period, an
increase of 22%. The increase was driven by a 28% increase in
deliveries to 949 homes, compared to 740 in the first quarter of
2018, partially offset by a 5% year-over-year decline in the
average sales price of homes closed. Our decrease in ASP is based
on our change in product mix with a higher concentration of
deliveries from Texas.
Homebuilding gross margin percentage for homes closed during the
first quarter of 2019 was 16.0%, compared to 17.5% in the prior
year period. The year-over-year decrease was primarily attributable
to higher sales incentives on homes closed during the first
quarter. Incentives as a percentage of revenue was 3.3% during the
first quarter of 2019 as compared to 2.1% during the first quarter
of 2018.
Net new home orders for the quarter were 1,103, in line with
1,106 in the first quarter of 2018. Net new home orders reflect a
decrease in sales pace, as community count increased to 118 average
sales locations, from 84 in the year-ago period, an increase of
40%. Our cancellation rate for the first quarter of 2019 was 16%,
which is higher than the 10% experienced in the first quarter of
last year, but down significantly from the 24% cancellation rate we
experienced during the fourth quarter of 2018.
Sales and marketing expense during the first quarter of 2019
decreased to 5.6% of homebuilding revenue, compared to 6.1% in the
year-ago quarter, primarily due to a decrease in advertising and
model operations expense during the quarter. General and
administrative expenses decreased to 6.4% of homebuilding revenue,
compared to 6.6% in the year-ago quarter, primarily due to improved
operating leverage.
Pre-tax income was up 30.0% to $20.0 million, from $15.4 million
in the prior year. Provision for income tax was up to $4.9 million,
for an effective tax rate of 24.4%, compared to a provision of $2.8
million, or 18.3%, in the prior year. The increase is attributable
to certain one-time discreet items regarding stock compensation
expense during the current year.
Net income attributable to non-controlling interest was $7.0
million during the first quarter, which was higher than our prior
expectations due primarily to the timing of an additional phase of
deliveries in a joint venture project in Southern California.
Balance Sheet Update
At quarter end, cash and cash equivalents totaled $45.7 million,
owned real estate inventories totaled $2.3 billion, total assets
were $2.9 billion and total equity was $1.0 billion. Total debt to
book capitalization was 57.4%, and net debt to net book
capitalization was 56.6% at March 31, 2019, compared to 56.6% and
55.9% at December 31, 2018, respectively.
Recent Developments
On May 1, 2019, the Board of Directors of the Company approved a
limited waiver at the request of William H. Lyon solely for
purposes of Section 203 of the Delaware General Corporation Law to
allow Mr. Lyon and certain of his affiliates (the “Lyon
Stockholders”) to enter into certain arrangements with potential
unaffiliated co-investors in connection with potentially making a
proposal for a possible business combination with the Company, as
described in more detail in the Schedule 13D amendment filed by the
Lyon Stockholders on the SEC’s website on May 2, 2019. Mr. Lyon has
indicated that he is not engaged in active discussions, the Company
is not aware of any imminent proposal, and there is no assurance
that granting this waiver will lead to any potential
transaction.
Conference Call
The Company will host a conference call to discuss these results
today, Thursday, May 2nd, 2019 at 9:00 a.m. Pacific Time. The call
will be available via both the telephone at (855) 851-4524 or (720)
634-2900, conference ID #2977366, or through the Company’s website
at www.lyonhomes.com in the Investor Relations section of the
site.
A replay of the call will be available through May 9th, 2019 by
dialing (855) 859-2056 or (404) 537-3406, conference ID #2977366. A
webcast replay of the call will also be available on the Company’s
website approximately two hours after the broadcast.
About William Lyon Homes
William Lyon Homes is one of the largest Western U.S. regional
homebuilders. Headquartered in Newport Beach, California, the
Company is primarily engaged in the design, construction, marketing
and sale of single-family detached and attached homes in
California, Arizona, Nevada, Colorado, Washington, Oregon and
Texas. Its core markets include Orange County, Los Angeles, San
Diego, Riverside, San Bernardino, the South and East Bay Areas of
San Francisco, Phoenix, Las Vegas, Denver, Fort Collins, Portland,
Seattle, Houston, Austin and San Antonio. The Company has a
distinguished legacy of more than 60 years of homebuilding
operations, over which time it has sold in excess of 108,000 homes.
The Company markets and sells its homes under the William Lyon
Homes brand in all of its markets except for Washington and Oregon,
where the Company operates under the Polygon Northwest brand.
Forward-Looking Statements
Certain statements contained in this release and the
accompanying comments during our conference call that are not
historical information may constitute “forward-looking statements”
as defined by the Private Securities Litigation Reform Act of 1995,
including, but not limited to, forward-looking statements related
to: anticipated deliveries, revenue and pre-tax income, gross
margin performance, backlog conversion rates, operating and
financial results for the second quarter of 2019 and beyond,
community count growth and project performance, market and industry
trends, average sale price of homes to be closed in various
periods, SG&A percentage, future cash needs and liquidity,
minority interest from our homebuilding joint ventures, any actions
that may be taken by the Lyon Stockholders or other third parties,
leverage ratios and reduction strategies, land acquisitions,
financial services and ancillary business performance and
strategies. The forward-looking statements involve risks and
uncertainties and actual results may differ materially from those
projected or implied. The Company makes no commitment, and
disclaims any duty, to update or revise any forward-looking
statements to reflect future events or changes in these
expectations. Further, certain forward-looking statements are based
on assumptions of future events which may not prove to be accurate.
Factors that may impact such forward-looking statements include,
among others: changes in mortgage and other interest rates;
affordability pressures; adverse weather conditions; the
availability of labor and homebuilding materials and increased
construction cycle times; our financial leverage and level of
indebtedness and any inability to comply with financial and other
covenants under our debt instruments; continued volatility and
worsening in general economic conditions either internationally,
nationally or in regions in which we operate; increased housing
supply in our markets; increased outside broker costs; increased
costs of homebuilding materials; changes in governmental laws and
regulations and compliance, increased costs, fees and delays
associated therewith; government actions, policies, programs and
regulations directed at or affecting the housing market (including
the Tax Cuts and Jobs Act (“TCJA”), the Dodd-Frank Act, tax
benefits associated with purchasing and owning a home, and the
standards, fees and size limits applicable to the purchase or
insuring of mortgage loans by government-sponsored enterprises and
government agencies), the homebuilding industry, or construction
activities; changes in existing tax laws or enacted corporate
income tax rates, including pursuant to the TCJA; worsening in
markets for residential housing; the impact of construction defect,
product liability and home warranty claims, including the adequacy
of self-insurance accruals, and the applicability and sufficiency
of our insurance coverage; defects in manufactured products or
other homebuilding materials; decline in real estate values
resulting in impairment of our real estate assets; volatility in
the banking industry, credit and capital markets; restraints on
foreign investment; terrorism or other hostilities involving the
United States and other geopolitical risk as well as restrictive
policies such as tariffs or capital investment restrictions;
building moratorium or “slow-growth” or “no-growth” initiatives
that could be implemented in states in which we operate; conditions
in the capital, credit and financial markets, including mortgage
lending standards and the availability and timing of mortgage
financing; changes in generally accepted accounting principles or
interpretations of those principles; competition for home sales
from other sellers of new and resale homes; cancellations and our
ability to realize our backlog; the occurrence of events such as
landslides, soil subsidence and earthquakes that are uninsurable,
not economically insurable or not subject to effective
indemnification agreements; limitations on our ability to utilize
our tax attributes; whether an ownership change occurred that
could, under certain circumstances, have resulted in the limitation
of our ability to offset prior years’ taxable income with net
operating losses; the timing of receipt of regulatory approvals and
the opening of projects; the availability and cost of land for
future development; and additional factors discussed under the
sections captioned “Risk Factors” included in our annual and
quarterly reports filed with the Securities and Exchange
Commission. The foregoing list is not exhaustive. New risk factors
may emerge from time to time and it is not possible for management
to predict all such risk factors or to assess the impact of such
risk factors on our business.
WILLIAM LYON HOMES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands
except number of shares and per share data) (unaudited)
Three Three
Months Months Ended Ended March
31, March 31, 2019 2018 Operating revenue
Home sales $ 453,775 $ 372,385 Construction services 2,089
983 455,864 373,368
Operating costs Cost of sales — homes (381,044 ) (307,308 )
Construction services (1,969 ) (983 ) Sales and marketing (25,277 )
(22,693 ) General and administrative (29,126 ) (24,521 )
Transaction expenses - (3,130 ) Other (344 ) (298 )
(437,760 ) (358,933 ) Operating income 18,104 14,435
Equity in income of unconsolidated joint ventures 912 932 Other
income, net 631 35 Income before
extinguishment of debt 19,647 15,402 Gain on extinguishment of debt
383 - Income before provision for
income taxes 20,030 15,402 Provision for income taxes (4,896
) (2,814 ) Net income 15,134 12,588 Less: Net income
attributable to noncontrolling interests (7,015 )
(4,260 ) Net income available to common stockholders $ 8,119
$ 8,328 Income per common share: Basic $ 0.22 $ 0.22
Diluted $ 0.21 $ 0.21 Weighted average common shares outstanding:
Basic 37,610,766 37,931,256 Diluted 38,755,113 39,855,683
WILLIAM LYON HOMES CONSOLIDATED BALANCE SHEETS (in
thousands, except number of shares and par value per share)
March 31, December
31, 2019 2018 (unaudited) ASSETS
Cash and cash equivalents $ 45,709 $ 33,779 Receivables 15,417
13,502 Escrow proceeds receivable 2,659 - Real estate inventories
Owned 2,303,536 2,333,207 Not owned 294,085 315,576 Investment in
unconsolidated joint ventures 5,662 5,542 Goodwill 123,695 123,695
Intangibles, net of accumulated amortization of $4,640 as of March
31, 2019 and December 31, 2018 6,700 6,700 Deferred income taxes
46,900 47,241 Lease right-of-use assets 13,135 13,561 Other assets,
net 37,515 36,971 Total assets $ 2,895,013 $
2,929,774
LIABILITIES AND EQUITY Accounts payable $ 108,506
$ 128,371 Accrued expenses 96,715 150,155 Liabilities from
inventories not owned 294,085 315,576 Revolving credit facility
110,000 45,000 Construction notes payable 1,204 1,231 Joint venture
notes payable 144,027 151,788 7% Senior Notes due August 15, 2022
347,639 347,456 6% Senior Notes due September 1, 2023 344,206
343,878 57/8% Senior Notes due January 31, 2025 428,430
431,992 1,874,812 1,915,447 Commitments and
contingencies Equity: William Lyon Homes stockholders’ equity
Preferred stock, par value $0.01 per share; 10,000,000 shares
authorized and no shares issued and outstanding at March 31, 2019
and December 31, 2018 - - Common stock, Class A, par value $0.01
per share; 150,000,000 shares authorized; 34,020,166 and 33,904,972
shares issued, 32,995,571 and 32,690,378 shares outstanding at
March 31, 2019 and December 31, 2018, respectively 340 339 Common
stock, Class B, par value $0.01 per share; 30,000,000 shares
authorized; 4,817,394 shares issued and outstanding at March 31,
2019 and December 31, 2018 48 48 Additional paid-in capital 445,953
445,545 Retained earnings 425,509 417,390 Total
William Lyon Homes stockholders' equity 871,850 863,322
Noncontrolling interests 148,351 151,005 Total equity
1,020,201 1,014,327 Total liabilities and equity $
2,895,013 $ 2,929,774
WILLIAM LYON HOMES SELECTED
FINANCIAL AND OPERATING INFORMATION (unaudited)
Three Months Ended March 31,
2019 2018 Consolidated
Consolidated Percentage % Total Total
Change Selected Financial Information (dollars in
thousands) Homes closed 949 740 28
% Home sales revenue $ 453,775 $ 372,385 22 % Cost of sales
(excluding interest) (360,628 ) (287,769 ) 25 %
Adjusted homebuilding gross margin (1) $ 93,147 $ 84,616
10 % Adjusted homebuilding gross margin percentage (1)
20.5 % 22.7 % (10 %) Interest in cost of sales
(20,415 ) (18,804 ) 9 % Purchase accounting adjustments -
(735 ) (100 %) Gross margin $ 72,732 $ 65,077
12 % Gross margin percentage 16.0 % 17.5 % (8
%)
Number of homes closed California 281 210 34 %
Arizona 89 105 (15 %) Nevada 71 74 (4 %) Colorado 126 93 35 %
Washington 72 94 (23 %) Oregon 120 104 15 % Texas 190
60 217 % Total 949 740 28
%
Average sales price of homes closed California $
662,300 $ 642,000 3 % Arizona 332,500 305,100 9 % Nevada 531,100
664,500 (20 %) Colorado 444,700 430,800 3 % Washington 581,300
581,600 (0 %) Oregon 425,700 450,500 (6 %) Texas 270,400
246,200 10 % Company Average $ 478,200 $
503,200 (5 %)
Number of net new home orders
California 290 283 2 % Arizona 112 108 4 % Nevada 59 109 (46 %)
Colorado 172 144 19 % Washington 94 179 (47 %) Oregon 112 209 (46
%) Texas 264 74 257 % Total
1,103 1,106 (0 %)
Average number of
sales locations during period California 35 22 59 % Arizona 9 6
50 % Nevada 13 12 8 % Colorado 11 15 (27 %) Washington 10 9 11 %
Oregon 16 15 7 % Texas 24 5 380 % Total
118 84 40 % (1)
Adjusted homebuilding gross margin is a financial measure that is
not prepared in accordance with U.S. generally accepted accounting
principles, or U.S. GAAP. It is used by management in evaluating
operating performance and in making strategic decisions regarding
sales pricing, construction and development pace, product mix and
other operating decisions. We believe this information is
meaningful as it isolates the impact that interest and purchase
accounting adjustments have on homebuilding gross margin and allows
investors to make better comparisons with our competitors.
WILLIAM LYON HOMES SELECTED FINANCIAL AND OPERATING
INFORMATION (unaudited)
As of March 31, 2019 2018
Consolidated Consolidated Percentage %
Total Total Change Backlog of homes sold
but not closed at end of period California 261 388 (33 %)
Arizona 181 164 10 % Nevada 82 121 (32 %) Colorado 180 223 (19 %)
Washington 63 176 (64 %) Oregon 120 177 (32 %) Texas 308
211 46 % Total 1,195 1,460 (18 %)
Dollar amount of homes sold but not closed at end of period (in
thousands) California $ 165,965 $ 282,484 (41 %) Arizona 63,640
51,055 25 % Nevada 42,467 80,379 (47 %) Colorado 79,875 90,312 (12
%) Washington 45,968 115,375 (60 %) Oregon 48,524 76,433 (37 %)
Texas 80,752 56,093 44 % Total $ 527,191 $ 752,131
(30 %)
Lots owned and controlled at end of period
Lots owned California 3,269 3,634 (10 %) Arizona 3,564 4,116
(13 %) Nevada 2,555 2,910 (12 %) Colorado 750 1,266 (41 %)
Washington 1,423 1,377 3 % Oregon 2,592 2,226 16 % Texas
3,665 3,345 10 % Total 17,818 18,874 (6 %)
Lots controlled California 1,292 1,985 (35 %) Arizona
660 651 1 % Nevada 101 12 NM Colorado 2,333 822 184 % Washington
758 793 (4 %) Oregon 1,652 1,910 (14 %) Texas 4,228
3,763 12 % Total 11,024 9,936 11 %
Total
lots owned and controlled California 4,561 5,619 (19 %) Arizona
4,224 4,767 (11 %) Nevada 2,656 2,922 (9 %) Colorado 3,083 2,088 48
% Washington 2,181 2,170 1 % Oregon 4,244 4,136 3 % Texas
7,893 7,108 11 % Total 28,842 28,810 0 %
(1) Certain lots in California, Texas, Arizona
and Washington are consolidated on the Company’s accompanying
balance sheet in accordance with FASB ASC Topic 470, Debt (“ASC
470”). Included in lots owned are 645 lots in California,1,354 lots
in Texas, 1,931 lots in Arizona, and 72 lots in Washington that are
associated with land banking transactions that are consolidated on
the Company’s accompanying balance sheet in accordance with ASC
470.
WILLIAM LYON HOMES SUPPLEMENTAL FINANCIAL
INFORMATION (dollars in thousands) (unaudited)
Three Three Months Months
Ended Ended March 31, March 31,
2019 2018 Net income available to common
stockholders $ 8,119 $ 8,328 Interest incurred $ 24,081 $ 19,258
Adjusted EBITDA (1) $ 36,596 $ 41,712 Adjusted EBITDA Margin (2)
8.0 % 11.2 % Ratio of adjusted EBITDA to interest incurred 1.5 2.2
Balance Sheet Data March 31,
December 31, 2019 2018 Cash and cash
equivalents $ 45,709 $ 33,779 Total William Lyon Homes
stockholders’ equity 871,850 863,322 Noncontrolling interests
148,351 151,005 Total debt 1,375,506 1,321,345
Total capital $ 2,395,707 $ 2,335,672
Ratio of debt to total capital 57.4 % 56.6 % Ratio of net debt to
total capital (net of cash) 56.6 % 55.9 %
WILLIAM LYON HOMES
SUPPLEMENTAL FINANCIAL
INFORMATION
(dollars in thousands)
(unaudited)
(1) Adjusted EBITDA means net income available
to common stockholders plus (i) provision for income taxes, (ii)
interest expense, (iii) amortization of capitalized interest
included in cost of sales, (iv) stock based compensation, (v)
depreciation and amortization, (vi) non-cash purchase accounting
adjustments, (vii) cash distributions of income from unconsolidated
joint ventures, (viii) equity in income of unconsolidated joint
ventures, (ix) transaction expenses, and (x) (gain) loss on
extinguishment of debt. Other companies may calculate adjusted
EBITDA differently. Adjusted EBITDA is not a financial measure
prepared in accordance with U.S. GAAP. Adjusted EBITDA is presented
herein because management believes the presentation of adjusted
EBITDA provides useful information to the Company’s investors
regarding the Company’s financial condition and results of
operations because adjusted EBITDA is a widely utilized indicator
of a company's operating performance. Adjusted EBITDA should not be
considered as an alternative for net income, cash flows from
operating activities and other consolidated income or cash flow
statement data prepared in accordance with accounting principles
generally accepted in the United States or as a measure of
profitability or liquidity. A reconciliation of net income
available to common stockholders to adjusted EBITDA is provided in
the following table:
Three
Three Months Months Ended
Ended March 31, March 31, 2019
2018 Net income available to common
stockholders $ 8,119 $ 8,328 Provision for income taxes 4,896 2,814
Interest expense Interest incurred 24,081 19,258 Interest
capitalized (24,081 ) (19,258 ) Amortization of capitalized
interest included in cost of sales 20,415 18,825 Stock based
compensation 2,765 3,181 Depreciation and amortization 745 2,056
Non-cash purchase accounting adjustments - 735 Cash distributions
of income from unconsolidated joint ventures 951 3,575 Equity in
income of unconsolidated joint ventures (912 ) (932 ) Transaction
expenses - 3,130 (Gain) Loss on extinguishment of debt (383
) - Adjusted EBITDA $ 36,596 $ 41,712
(2) Calculated as Adjusted EBITDA as a
percentage of operating revenue.
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version on businesswire.com: https://www.businesswire.com/news/home/20190502005308/en/
Investor/Media Contacts:Larry ClarkFinancial Profiles,
Inc.(310) 622-8223WLH@finprofiles.com
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