The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2021 second quarter.
Second Quarter 2021 Financial Results
- Net income of $4.8 million, or $0.26 per diluted share
- Home sales revenue up 75% to $135.9 million as compared to
$77.8 million for the 2020 second quarter
- Home sales gross margin of 17.3% as compared to (9.6%) for the
2020 second quarter
- Homebuilding gross margin before impairments was up 250 basis
points to 17.3% as compared to 14.8%* in the 2020 second quarter;
as further adjusted to exclude purchase accounting adjustments
related to the Epic Homes acquisition, adjusted home sales gross
margin was 17.8%* for the 2021 second quarter
- Adjusted homebuilding gross margin (which excludes impairments
and interest in cost of home sales) was 21.4%* as compared to
20.8%* in the 2020 second quarter
- Homes in backlog up 169% to 632 homes as compared to 235 homes
at the end of the 2020 second quarter
- Backlog dollar value increased 160% to $439.4 million
- Monthly sales absorption increased 50% to 3.3 per community as
compared to 2.2 in the 2020 second quarter
- Net new orders up 14% to 187 as compared to 164 in the 2020
second quarter
- Ending cash balance of $117.3 million as compared to $85.6
million at the end of the 2020 second quarter
- Debt-to-capital ratio of 58.1% and a net debt-to-capital ratio
of 44.6%*, a 690-basis point improvement from the 2020 second
quarter
"The New Home Company continued to benefit from a strong housing
market and its intent focus on improving gross margins by managing
sales price and pace, which resulted in $4.8 million of net income
for the 2021 second quarter,” stated Larry Webb, Executive Chairman
of The New Home Company. “Our strategy over the past few years to
diversify both our product offerings and geographic presence has
been a success. Our recent acquisition of Epic Homes in Denver,
Colorado made a positive contribution during the quarter, and we
expect this to continue based on solid demand in this market and
over $130 million in backlog as of the end of the quarter. We
experienced strong demand across all of our markets and product
offerings, and we intentionally limited our sales releases during
the quarter to implement periodic price increases and manage our
backlog and construction schedules. Despite this metering of sales,
our absorption pace still increased by 50% as compared to the 2020
second quarter with both our Southern California and Northern
California markets increasing their absorption pace by over 100%
during the second quarter as compared to the prior year."
Leonard Miller, President and Chief Executive Officer stated,
"The momentum we’ve been building since the second half of 2020
continued into the 2021 second quarter from a net order, price
appreciation and margin growth perspective. For the six months
ended June 30, 2021, our adjusted homebuilding gross margin
increased 220 basis points to 21.4%* as compared to the first half
of 2020. We continue to experience challenges related to cost
increases, particularly in our Arizona and Colorado markets, but
successfully raised prices to cover the majority of these costs
during the quarter. Our quarter end backlog of 632 homes with a
value of $439.4 million positions us for a solid second half of
2021."
Mr. Miller concluded, “Our balance sheet remains in good shape
with a net debt-to-capital ratio of 44.6%*, $117 million of cash
and nothing drawn on our unsecured revolver at quarter end. We
continue to focus on our land pipeline to drive future top line
growth while monitoring our existing communities to find the right
balance of pace versus price in the current environment. The New
Home team has worked very hard to get the Company where it is
today, and we appreciate their continued efforts as we look forward
to the future."
Second Quarter 2021 Operating Results
For the 2021 second quarter, the Company generated pretax income
of $6.1 million compared to a $41.2 million pretax loss in the
prior year period, which included $19.0 million in inventory
impairment charges, a $20.0 million joint venture impairment charge
and $1.1 million in severance charges. Net income for the 2021
second quarter was $4.8 million, or $0.26 per diluted share,
compared to a net loss of $24.3 million, or ($1.32) per diluted
share, in the prior year period. Adjusted net loss for the 2020
second quarter (which excludes impairments, severance charges and a
net deferred tax asset remeasurement benefit), was $0.7 million*,
or ($0.04) adjusted net loss per diluted share*. Total revenues for
the 2021 second quarter were $140.5 million compared to $99.0
million in the prior year period, including $4.6 million and $21.2
million of fee building revenue, for the second quarters of 2021
and 2020, respectively.
Wholly Owned Projects
Net new home orders were 187 for the 2021 second quarter as
compared to 164 in the prior year. Monthly absorption pace for the
quarter increased 50% to 3.3 per community from 2.2 per community
in the prior year. The increase in monthly sales absorption pace
was partially offset by a decrease in our average selling
communities to 19 compared to 25 in the prior year. The 2020 second
quarter absorption rates and demand were negatively impacted by
slower sales activity and higher cancellations due to stay-at-home
orders implemented related to COVID-19 during the latter part of
the 2020 first quarter. The Company's cancellation rate for the
2021 second quarter was 7% as compared to 11% in the prior year
period.
Homes in backlog increased 169% to 632, and the dollar value of
homes in backlog increased 160% to $439.4 million. The
year-over-year increase was driven primarily by stronger order
activity over the last twelve months, coupled with the acquisition
of our Colorado operation during the 2021 first quarter and a
higher average community count in Arizona. The average selling
price of homes in backlog at the end of the 2021 second quarter
decreased to $695,000 as compared to $718,000 a year ago primarily
due to a mix shift to more affordable priced communities,
particularly in Arizona, which was partially offset by the average
selling price of homes in backlog from Colorado, which was $1.1
million as of the end of the quarter.
Home sales revenue increased 75% for the 2021 second quarter to
$135.9 million compared to $77.8 million for the 2020 second
quarter. This increase was largely the result of a 98% increase in
new home deliveries, which was partially offset by a 12% decrease
in average selling price to $666,000 and is consistent with our
strategy to offer homes at more affordable price points. The
decrease in average selling price was primarily driven by a
significant increase in deliveries from Arizona where the average
home price decreased from $1.2 million in the 2020 second quarter
to $399,000 in the 2021 second quarter due to a shift to more
affordable product.
Gross margin from home sales for the 2021 second quarter was
17.3% compared to (9.6%) for the prior year period, which included
$19.0 million in inventory impairment charges. Excluding the 2020
inventory impairment charges, gross margin from home sales was
14.8%* for the 2020 second quarter. The 250-basis point improvement
before impairments was primarily due to a 190-basis point reduction
in interest in cost of sales as a percentage of home sales revenue
and price increases. The 2021 second quarter cost of home sales
included $730,000 of purchase accounting adjustments related to the
acquisition of Epic Homes. Homebuilding gross margin before
purchase accounting adjustments for the 2021 second quarter was
17.8%*. Adjusted homebuilding gross margin, excluding inventory
impairments and interest in cost of home sales was 21.4%* for the
2021 second quarter as compared to 20.8%* in the prior year
period.
The Company's SG&A expense rate as a percentage of home
sales revenue for the 2021 second quarter was 12.7% compared to
17.1% in the prior year period. The 440-basis point improvement in
the SG&A rate was primarily attributable to a 75% increase in
home sales revenue during the 2021 second quarter and to a lesser
extent, lower amortization of capitalized model costs in the 2021
second quarter and $0.9 million in pretax severance charges in the
2020 second quarter. These items were partially offset by a $0.7
million decrease in G&A expenses that were allocated to the fee
building segment as compared to the 2020 second quarter and higher
personnel costs.
Fee Building Projects
Fee building revenue for the 2021 second quarter was $4.6
million compared to $21.2 million in the prior year period. The
reduction in fee building revenue was primarily due to the wind
down of our fee building arrangement with Irvine Pacific.
Unconsolidated Joint Ventures
(JVs)
The company had no income or loss from unconsolidated joint
ventures during the 2021 second quarter as compared to a $20.0
million loss in the 2020 second quarter related to an impairment
recorded at a land development joint venture in Northern
California. During the 2021 first quarter, the Company's last
active joint venture delivered its final homes and completed its
principal operating activities, and as of such date all of the
Company's joint ventures were effectively considered inactive.
Interest Expense
The Company expensed approximately $91,000 of interest costs
directly to interest expense during the 2021 second quarter
compared to $1.3 million in interest expense in the prior year
second quarter. The year-over-year decrease in interest expense was
the result of higher qualified inventory and lower debt.
Balance Sheet and Liquidity
The Company ended the quarter with $117.3 million in cash and
cash equivalents, $280.6 million in debt related to its senior
notes due in 2025 and no borrowings outstanding under its revolving
credit facility. During the 2021 second quarter, the Company
generated $2.5 million in operating cash flows. The Company had a
debt-to-capital ratio of 58.1% and a net debt-to-capital ratio of
44.6%*, which represented a 690 basis point year-over-year
improvement. The Company owned or controlled 2,298 lots through its
wholly owned operations, of which 911 lots, or 40%, were controlled
through option contracts.
Agreement and Plan of Merger
On July 23, 2021, the Company entered into a definitive
agreement and plan of merger (the "Merger Agreement") with certain
funds ("Apollo Funds") managed by affiliates of Apollo Global
Management, Inc. pursuant to which the Apollo Funds have agreed to
acquire the Company in an all-cash transaction for $9.00 per share,
subject to the terms and conditions of the Merger Agreement.
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, July 29, 2021 to review second quarter
results and discuss recent events, forward-looking statements, and
factors that may affect the Company's future results. The
conference call will be available in the Investors section of the
Company’s website at www.NWHM.com. To listen to the broadcast live,
go to the site approximately 15 minutes prior to the scheduled
start time in order to register, download and install any necessary
audio software. To participate in the telephone conference call,
dial 1-877-407-0789 (domestic) or 1-201-689-8562 (international) at
least five minutes prior to the start time. Replays of the
conference call will be available through August 28, 2021 and can
be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the pass code 13721049. The Company
will not hold a question and answer session during this conference
call.
* Adjusted net income (loss), adjusted net income (loss) per
diluted share, homebuilding gross margin before impairments and
adjusted homebuilding gross margin (or homebuilding gross margin
excluding impairments and interest in cost of home sales),
homebuilding gross margin before purchase accounting adjustments,
net debt-to-capital ratio, and selling, general and administrative
costs excluding acquisition transaction costs and severance charges
as a percentage of home sales revenue 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
NEW HOME is a publicly traded company listed on the New York
Stock Exchange under the symbol “NWHM.” It 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, Arizona and Colorado.
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: the successful completion of the
proposed acquisition of us (the “Transaction”) by certain funds
managed by affiliates of Apollo Global Management, Inc., or the
failure to complete the Transaction; the impact of the pendency of
the Transaction on our business and operations; the timing and
expected financing of the Transaction; the possibility that any or
all of the various conditions to the consummation of the
Transaction may not be satisfied or waived in a timely manner, if
at all; the possibility of business disruptions due to the
Transaction-related uncertainty; the occurrence of any event,
change or other circumstance that could give rise to the
termination of the merger agreement related the Transaction; a
pandemic, epidemic, or outbreak of infectious disease or similar
threat, and the response to such event by government agencies and
authorities, adverse impacts due to the COVID-19 pandemic,
including a recession in the U.S., which could include, among other
things, a significant decrease in demand for our homes or consumer
confidence generally with respect to purchasing a home, the impact
of legislation designed to provide economic relief from a
recession, the inability of employees to work and of customers to
visit our communities due to government movement restrictions or
illness, disruptions in our supply chain, our inability to access
capital markets due to lack of liquidity in the economy resulting
from the responses to the COVID-19 pandemic, inconsistencies in the
classification of homebuilding as an essential business,
recognition of charges which may be material for inventory
impairments or land option contract abandonments; economic changes
either nationally or in the markets in which we operate, including
declines in employment, volatility of mortgage interest rates and
inflation; a downturn in the homebuilding industry; changes in
sales conditions, including home prices, in the markets where we
build homes; our significant amount of debt and the impact of
restrictive covenants in our debt agreements; our ability to repay
our debt as it comes due; changes in our credit rating or outlook;
volatility and uncertainty in the credit markets and broader
financial markets; our business and investment strategy including
our plans to sell more affordably priced homes; availability of
land to acquire and our ability to acquire such land on favorable
terms or at all; our liquidity and availability, terms and
deployment of capital; changes in margin; write-downs; shortages of
or increased prices for labor, land or raw materials used in
housing construction; adverse weather conditions and natural
disasters (including wild fires and mudslides); our concentration
in California; issues concerning our joint venture partnerships;
the cost and availability of insurance and surety bonds;
governmental regulation, including the impact of "slow growth" or
similar initiatives; changes in, or the failure or inability to
comply with, governmental laws and regulations; the timing of
receipt of regulatory approvals and the opening of projects; delays
in the land entitlement process, development, construction, or the
opening of new home communities; litigation and warranty claims;
the degree and nature of competition; the impact of recent
accounting standards; availability of qualified personnel and our
ability to retain our key personnel; and information technology
failures and data security breaches, including issues involving
increased reliance on technology due to critical business functions
being done remotely because of COVID-19; and additional factors
discussed under the sections captioned “Risk Factors” included in
our annual report and other reports filed with the Securities and
Exchange Commission. The Company reserves the right to make such
updates from time to time by press release, periodic report or
other method of public disclosure without the need for specific
reference to this press release. No such update shall be deemed to
indicate that other statements not addressed by such update remain
correct or create an obligation to provide any other updates.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
(Dollars in thousands, except per
share amounts)
Revenues:
Home sales
$
135,940
$
77,757
$
229,795
$
173,416
Land sales
—
10
—
157
Fee building, including management
fees
4,586
21,193
9,887
57,420
140,526
98,960
239,682
230,993
Cost of Sales:
Home sales
112,453
66,216
190,301
150,938
Home sales impairments
—
19,000
—
19,000
Land sales
—
10
—
157
Fee building
4,494
20,985
9,691
56,482
116,947
106,211
199,992
226,577
Gross Margin:
Home sales
23,487
(7,459
)
39,494
3,478
Land sales
—
—
—
—
Fee building
92
208
196
938
23,579
(7,251
)
39,690
4,416
Selling and marketing expenses
(7,778
)
(6,386
)
(14,432
)
(13,852
)
General and administrative expenses
(9,453
)
(6,892
)
(17,724
)
(12,915
)
Equity in net income (loss) of
unconsolidated joint ventures
—
(19,962
)
174
(21,899
)
Interest expense
(91
)
(1,271
)
(445
)
(1,989
)
Project abandonment costs
(21
)
(94
)
(89
)
(14,130
)
Gain on early extinguishment of debt
—
702
—
579
Other income (expense), net
(116
)
(68
)
(50
)
155
Pretax income (loss)
6,120
(41,222
)
7,124
(59,635
)
(Provision) benefit for income taxes
(1,346
)
16,929
(1,797
)
26,866
Net income (loss)
$
4,774
$
(24,293
)
$
5,327
$
(32,769
)
Earnings (loss) per share:
Basic
$
0.26
$
(1.32
)
$
0.29
$
(1.71
)
Diluted
$
0.26
$
(1.32
)
$
0.29
$
(1.71
)
Weighted average shares outstanding:
Basic
18,075,687
18,341,549
18,092,259
19,146,687
Diluted
18,446,015
18,341,549
18,431,276
19,146,687
CONSOLIDATED BALANCE
SHEETS
June 30,
December 31,
2021
2020
(Dollars in thousands, except per
share amounts)
(Unaudited)
Assets
Cash and cash equivalents
$
117,329
$
107,279
Restricted cash
22
180
Contracts and accounts receivable
4,501
4,924
Due from affiliates
61
102
Real estate inventories
358,273
314,957
Investment in unconsolidated joint
ventures
769
2,107
Deferred tax asset, net
14,268
15,447
Other assets
50,263
50,703
Total assets
$
545,486
$
495,699
Liabilities and equity
Accounts payable
$
16,084
$
17,182
Accrued expenses and other liabilities
46,092
36,210
Senior notes, net
280,579
244,865
Total liabilities
342,755
298,257
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, 18,160,613 and 18,122,345, shares issued and
outstanding as of June 30, 2021 and December 31, 2020,
respectively
182
181
Additional paid-in capital
191,457
191,496
Retained earnings
11,092
5,765
Total stockholders' equity
202,731
197,442
Total liabilities and equity
$
545,486
$
495,699
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2021
2020
(Dollars in thousands)
Operating activities:
Net income (loss)
$
5,327
$
(32,769
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Deferred taxes
1,179
1,637
Amortization of stock-based
compensation
1,258
1,110
Inventory impairments
—
19,000
Project abandonment costs
89
14,130
Equity in net (income) loss of
unconsolidated joint ventures
(174
)
21,899
Depreciation and amortization
2,727
3,623
Gain on early extinguishment of debt
—
(579
)
Net changes in operating assets and
liabilities:
Contracts and accounts receivable
527
8,870
Due from affiliates
41
98
Real estate inventories
(5,185
)
30,579
Other assets
840
(31,133
)
Accounts payable
(3,762
)
(8,932
)
Accrued expenses and other liabilities
2,122
(5,510
)
Net cash provided by operating
activities
4,989
22,023
Investing activities:
Purchases of property and equipment
(130
)
(143
)
Contributions to unconsolidated joint
ventures
—
(3,847
)
Distributions of capital and repayment of
advances from unconsolidated joint ventures
1,512
2,370
Cash paid for acquisition, net of cash
acquired
(6,477
)
—
Net cash provided by investing
activities
(5,095
)
(1,620
)
Financing activities:
Proceeds from senior notes
36,138
—
Repurchases of senior notes
—
(9,825
)
Proceeds from notes payable
—
7,036
Repayment of notes payable
(23,848
)
(7,036
)
Payment of debt issuance costs
(996
)
(255
)
Repurchases of common stock
(976
)
(3,718
)
Tax withholding paid on behalf of
employees for stock awards
(320
)
(304
)
Net cash used in financing activities
9,998
(14,102
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
9,892
6,301
Cash, cash equivalents and restricted cash
– beginning of period
107,459
79,431
Cash, cash equivalents and restricted cash
– end of period
$
117,351
$
85,732
KEY FINANCIAL AND OPERATING
DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
Three Months Ended June
30,
2021
2020
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
62
$
49,399
$
797
50
$
41,440
$
829
24
%
19
%
(4
)%
Northern California
79
52,518
665
48
30,156
628
65
%
74
%
6
%
Arizona
46
18,366
399
5
6,161
1,232
820
%
198
%
(68
)%
Colorado
17
15,657
921
—
—
N/A
N/A
N/A
N/A
Total
204
$
135,940
$
666
103
$
77,757
$
755
98
%
75
%
(12
)%
Six Months Ended June
30,
2021
2020
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
114
$
86,940
$
763
118
$
104,457
$
885
(3
)%
(17
)%
(14
)%
Northern California
149
98,191
659
77
50,420
655
94
%
95
%
1
%
Arizona
66
26,064
395
15
18,539
1,236
340
%
41
%
(68
)%
Colorado
21
18,600
886
—
—
N/A
N/A
N/A
N/A
Total
350
$
229,795
$
657
210
$
173,416
$
826
67
%
33
%
(20
)%
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
% Change
2021
2020
% Change
Net New Home Orders:
Southern California
40
75
(47
)%
97
137
(29
)%
Northern California
75
60
25
%
204
128
59
%
Arizona
51
29
76
%
133
31
329
%
Colorado
21
—
N/A
36
—
N/A
Total
187
164
14
%
470
296
59
%
Selling Communities at End of
Period:
Southern California
2
11
(82
)%
Northern California
6
10
(40
)%
Arizona
7
4
75
%
Colorado
4
—
N/A
Total
19
25
(24
)%
Average Selling Communities:
Southern California
2
11
(82
)%
4
11
(64
)%
Northern California
6
11
(45
)%
7
10
(30
)%
Arizona
7
3
133
%
7
2
250
%
Colorado
4
—
N/A
2
—
N/A
Total
19
25
(24
)%
20
23
(13
)%
Monthly Sales Absorption Rate per
Community (1):
Southern California
5.7
2.3
148
%
4.4
2.1
110
%
Northern California
4.2
1.9
121
%
4.7
2.1
124
%
Arizona
2.6
3.2
(19
)%
3.2
2.2
45
%
Colorado
1.9
—
N/A
2.6
—
N/A
Total
3.3
2.2
50
%
3.9
2.1
86
%
(1)
Monthly sales absorption
represents the number of net new home orders divided by the number
of average selling communities for the period.
Backlog:
As of June 30,
2021
2020
% Change
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Homes
Dollar Value
Average Price
Southern California
59
$
45,601
$
773
91
$
74,547
$
819
(35
)%
(39
)%
(6
)%
Northern California
227
166,041
731
117
81,909
700
94
%
103
%
4
%
Arizona
229
97,684
427
27
12,337
457
748
%
692
%
(7
)%
Colorado
117
130,110
1,112
—
—
N/A
N/A
N/A
N/A
Total
632
$
439,436
$
695
235
$
168,793
$
718
169
%
160
%
(3
)%
Lots Owned and Controlled:
As of June 30,
2021
2020
% Change
Lots Owned:
Southern California
186
397
(53
)%
Northern California
511
558
(8
)%
Arizona
499
397
26
%
Colorado
191
—
N/A
Total
1,387
1,352
3
%
Lots Controlled: (1)
Southern California
589
415
42
%
Northern California
175
210
(17
)%
Arizona
63
262
(76
)%
Colorado
84
—
N/A
Total
911
887
3
%
Lots Owned and Controlled - Wholly
Owned
2,298
2,239
3
%
Fee Building Lots (2)
38
892
(96
)%
(1)
Includes lots that we control
under purchase and sale agreements or option agreements with
nonrefundable deposits and certain agreements with refundable
deposits that we have a high degree of confidence that we will
pursue, all of which are subject to customary conditions and have
not yet closed. This table excludes 2,511 lots controlled through
purchase and sale agreements or option agreements with refundable
deposits totaling $0.4 million that are still undergoing due
diligence. There can be no assurance that any of the foregoing
acquisitions will occur.
(2)
Lots owned by third party
property owners for which we perform general contracting or
construction management services.
Other Financial Data:
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Interest incurred
$
5,751
$
6,150
$
11,082
$
12,530
Adjusted EBITDA(1)
$
13,932
$
6,394
$
22,095
$
13,375
Adjusted EBITDA margin percentage (1)
9.9
%
6.5
%
9.2
%
5.8
%
LTM(2) Ended June 30,
2021
2020
Interest incurred
$
22,488
$
25,982
Adjusted EBITDA(1)
$
46,045
$
36,859
Adjusted EBITDA margin percentage (1)
8.9
%
6.0
%
Ratio of Adjusted EBITDA to total interest
incurred(1)
2.0x
1.4x
June 30,
December 31,
2021
2020
Ratio of debt-to-capital
58.1
%
55.4
%
Ratio of net debt-to-capital(1)
44.6
%
41.0
%
Ratio of debt to LTM(2) Adjusted
EBITDA(1)
6.1x
6.6x
Ratio of net debt to LTM(2) Adjusted
EBITDA(1)
3.5x
3.7x
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.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (Unaudited)
In this earnings release, we utilize certain non-GAAP financial
measures as defined by the Securities and Exchange Commission. We
present these measures because we believe they, and similar
measures, are useful to management and investors in evaluating the
Company’s operating performance and financing structure. We also
believe these measures facilitate the comparison of our operating
performance and financing structure with other companies in our
industry. Because these measures are not calculated in accordance
with Generally Accepted Accounting Principles (“GAAP”), they may
not be comparable to other similarly titled measures of other
companies and should not be considered in isolation or as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP.
The following table reconciles net income (loss) to the non-GAAP
measure of adjusted net income (loss) (net income (loss) before
acquisition transaction costs, inventory impairments, abandoned
project costs, joint venture impairments, severance charges and
noncash deferred tax asset adjustments) and earnings (loss) per
share and earnings (loss) per diluted share to the non-GAAP
measures of adjusted earnings (loss) per share and adjusted diluted
earnings (loss) per share (earnings (loss) per share before
acquisition transaction costs, inventory impairments, abandoned
project costs, joint venture impairments, severance charges and
noncash deferred tax asset adjustments). We believe removing the
impact of these items is relevant to provide investors with an
understanding of the impact these items had on earnings.
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
(Dollars in thousands, except per
share amounts)
Net income (loss)
$
4,774
$
(24,293
)
$
5,327
$
(32,769
)
Acquisition transaction costs, net of
tax
—
—
765
—
Inventory impairments, abandoned project
costs, joint venture impairments and severance charges, net of
tax
—
25,414
—
34,847
Noncash deferred tax asset
remeasurement
—
(1,827
)
175
(3,941
)
Adjusted net income (loss)
$
4,774
$
(706
)
$
6,267
$
(1,863
)
Earnings (loss) per share:
Basic
$
0.26
$
(1.32
)
$
0.29
$
(1.71
)
Diluted
$
0.26
$
(1.32
)
$
0.29
$
(1.71
)
Adjusted earnings (loss) per share:
Basic
$
0.26
$
(0.04
)
$
0.35
$
(0.10
)
Diluted
$
0.26
$
(0.04
)
$
0.34
$
(0.10
)
Weighted average shares outstanding for
adjusted earnings (loss) per share:
Basic
18,075,687
18,341,549
18,092,259
19,146,687
Diluted
18,446,015
18,341,549
18,431,276
19,146,687
Inventory impairments
$
—
$
19,000
$
—
$
19,000
Abandoned project costs related to Arizona
luxury condominium community
—
—
—
14,000
Joint venture impairments related to joint
venture exits
—
20,038
—
22,325
Severance charges
—
1,091
—
1,091
Acquisition transaction costs
—
—
983
—
Less: Related tax benefit
—
(14,715
)
(218
)
(21,569
)
Acquisition transaction costs, inventory
impairments, abandoned project costs, joint venture impairments and
severance charges, net of tax
$
—
$
25,414
$
765
$
34,847
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
The following table reconciles the Company’s SG&A rate as a
percentage of home sales revenue calculated in accordance with GAAP
to the non-GAAP measure, SG&A rate excluding acquisition
transaction costs and severance charges. During the 2021 first
quarter, the Company incurred $983,000 in transaction related costs
associated with the acquisition of Epic Homes. During the 2020
second quarter, the Company incurred severance charges related to
right-sizing its operations by reducing headcount. We believe
removing the impact of these charges from our SG&A rate is
relevant to provide investors with a better comparison to rates
that do not include these charges.
Three Months Ended
As a Percentage of
Six Months Ended
As a Percentage of
June 30,
Home Sales Revenue
June 30,
Home Sales Revenue
2021
2020
2021
2020
2021
2020
2021
2020
(Dollars in thousands)
Selling and marketing expenses
$
7,778
$
6,386
5.7
%
8.2
%
$
14,432
$
13,852
6.3
%
8.0
%
General and administrative expenses
("G&A")
9,453
6,892
7.0
%
8.9
%
17,724
12,915
7.7
%
7.4
%
Total selling, marketing and G&A
("SG&A")
$
17,231
$
13,278
12.7
%
17.1
%
$
32,156
$
26,767
14.0
%
15.4
%
G&A
$
9,453
$
6,892
7.0
%
8.9
%
$
17,724
$
12,915
7.7
%
7.4
%
Less: Acquisition transaction costs and
severance charges
—
(873
)
—
(1.2
)%
(983
)
(873
)
(0.4
)%
(0.5
)%
G&A, excluding acquisition transaction
costs and severance charges
$
9,453
$
6,019
7.0
%
7.7
%
$
16,741
$
12,042
7.3
%
6.9
%
Selling and marketing expenses
$
7,778
$
6,386
5.7
%
8.2
%
$
14,432
$
13,852
6.3
%
8.0
%
G&A, excluding acquisition transaction
costs and severance charges
9,453
6,019
7.0
%
7.7
%
16,741
12,042
7.3
%
6.9
%
SG&A, excluding acquisition
transaction costs and severance charges
$
17,231
$
12,405
12.7
%
15.9
%
$
31,173
$
25,894
13.6
%
14.9
%
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) and homebuilding gross margin before purchase
accounting adjustments. We believe this information is meaningful,
as it isolates the impact home sales impairments, leverage and
purchase accounting adjustments have on homebuilding gross margin
and provides investors better comparisons with our competitors, who
adjust gross margins in a similar fashion.
Three Months Ended June
30,
Six Months Ended June
30,
2021
%
2020
%
2021
%
2020
%
(Dollars in thousands)
Home sales revenue
$
135,940
100.0
%
$
77,757
100.0
%
$
229,795
100.0
%
$
173,416
100.0
%
Cost of home sales
112,453
82.7
%
85,216
109.6
%
190,301
82.8
%
169,938
98.0
%
Homebuilding gross margin
23,487
17.3
%
(7,459
)
(9.6
)%
39,494
17.2
%
3,478
2.0
%
Add: Home sales impairment
—
—
%
19,000
24.4
%
—
—
%
19,000
11.0
%
Homebuilding gross margin before
impairments
23,487
17.3
%
11,541
14.8
%
39,494
17.2
%
22,478
13.0
%
Add: Interest in cost of home sales
5,616
4.1
%
4,601
6.0
%
9,643
4.2
%
10,747
6.2
%
Adjusted homebuilding gross margin
$
29,103
21.4
%
$
16,142
20.8
%
$
49,137
21.4
%
$
33,225
19.2
%
Home sales revenue
$
135,940
100.0
%
$
77,757
100.0
%
$
229,795
100.0
%
$
173,416
100.0
%
Cost of home sales
112,453
82.7
%
85,216
109.6
%
190,301
82.8
%
169,938
98.0
%
Homebuilding gross margin
23,487
17.3
%
(7,459
)
(9.6
)%
39,494
17.2
%
3,478
2.0
%
Add: Purchase accounting adjustments
730
0.5
%
—
N/A
1,025
0.4
%
—
N/A
Homebuilding gross margin before purchase
accounting adjustments
$
24,217
17.8
%
$
(7,459
)
(9.6
)%
$
40,519
17.6
%
$
3,478
2.0
%
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (continued) (Unaudited)
The following table reconciles the Company’s ratio of
debt-to-capital to the non-GAAP ratio of net debt-to-capital. We
believe that the ratio of net debt-to-capital is a relevant
financial measure for management and investors to understand the
leverage employed in our operations and as an indicator of the
Company’s ability to obtain financing.
June 30,
December 31,
2021
2020
(Dollars in thousands)
Total debt, net of unamortized premium and
debt issuance costs
$
280,579
$
244,865
Equity
202,731
197,442
Total capital
$
483,310
$
442,307
Ratio of debt-to-capital(1)
58.1
%
55.4
%
Total debt, net of unamortized premium and
debt issuance costs
$
280,579
$
244,865
Less: Cash, cash equivalents and
restricted cash
117,351
107,459
Net debt
163,228
137,406
Equity
202,731
197,442
Total capital
$
365,959
$
334,848
Ratio of net debt-to-capital(2)
44.6
%
41.0
%
(1)
The ratio of debt-to-capital is
computed as the quotient obtained by dividing total debt, net of
unamortized premium and debt issuance costs by total capital (the
sum of total debt, net of unamortized premium and debt issuance
costs plus equity).
(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 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. 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 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, (i) income (loss) from unconsolidated joint ventures,
and (j) acquisition transaction costs. Adjusted EBITDA margin
percentage is calculated by dividing Adjusted EBITDA by total
revenue for a given period. The ratio of Adjusted EBITDA to total
interest incurred is calculated by dividing Adjusted EBITDA by
total interest incurred for a given period. The ratio of debt to
Adjusted EBITDA is calculated by dividing debt at the period end by
Adjusted EBITDA for a given period. The ratio of net debt to
Adjusted EBITDA is calculated by dividing debt at the period end
less cash, cash equivalents and restricted cash by Adjusted EBITDA
for a given period. Other companies may calculate Adjusted EBITDA
differently. Management believes that Adjusted EBITDA assists
investors in understanding and comparing the operating
characteristics of homebuilding activities by eliminating many of
the differences in companies' respective capitalization, interest
costs, tax position, level of impairments and other non-recurring
items. Due to the significance of the GAAP components excluded,
Adjusted EBITDA should not be considered in isolation or as an
alternative to net income (loss), cash flows from operations or any
other performance measure prescribed by GAAP. A reconciliation of
net income (loss) to Adjusted EBITDA, and the calculations of
Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to
total interest incurred, the ratio of debt to Adjusted EBITDA, and
the ratio of net debt to Adjusted EBITDA are provided in the
following table.
Three Months Ended
Six Months Ended
LTM(1) Ended
June 30,
June 30,
June 30,
December 31,
2021
2020
2021
2020
2021
2020
2020
(Dollars in thousands)
Net income (loss)
$
4,774
$
(24,293
)
$
5,327
$
(32,769
)
$
5,227
$
(40,374
)
$
(32,869
)
Add:
Interest amortized to cost of sales
excluding impairment charges, and interest expensed
5,707
5,872
10,088
12,736
24,871
28,817
27,519
Provision (benefit) for income taxes
1,346
(16,929
)
1,797
(26,866
)
2,076
(30,991
)
(26,587
)
Depreciation and amortization
1,471
1,778
2,727
3,623
5,825
7,538
6,721
Amortization of stock-based
compensation
613
521
1,258
1,110
2,345
2,281
2,197
Cash distributions of income from
unconsolidated joint ventures
—
—
—
—
110
95
110
Severance charges
—
1,091
—
1,091
—
1,091
1,091
Acquisition transaction costs
—
—
983
—
983
—
—
Noncash inventory impairments and
abandonments
21
19,094
89
33,130
57
43,405
33,098
Less:
(Gain) loss on early extinguishment of
debt
—
(702
)
—
(579
)
7,833
(774
)
7,254
Equity in net (income) loss of
unconsolidated joint ventures
—
19,962
(174
)
21,899
(3,282
)
25,771
18,791
Adjusted EBITDA
$
13,932
$
6,394
$
22,095
$
13,375
$
46,045
$
36,859
$
37,325
Total Revenue
$
140,526
$
98,960
$
239,682
$
230,993
$
516,100
$
618,745
$
507,411
Adjusted EBITDA margin percentage
9.9
%
6.5
%
9.2
%
5.8
%
8.9
%
6.0
%
7.4
%
Interest incurred
$
5,751
$
6,150
$
11,082
$
12,530
$
22,488
$
25,982
$
23,936
Ratio of Adjusted EBITDA to total interest
incurred
2.4x
1.0x
2.0x
1.1x
2.0x
1.4x
1.6x
Total debt at period end
$
280,579
$
295,124
$
244,865
Ratio of debt to Adjusted EBITDA
6.1x
8.0x
6.6x
Total net debt at period end
$
163,228
$
209,392
$
137,406
Ratio of net debt to Adjusted EBITDA
3.5x
5.7x
3.7x
Total cash and inventory
$
475,602
$
456,537
$
422,236
Ratio of cash and inventory to debt
1.7x
1.5x
1.7x
(1)
"LTM" indicates amounts for the
trailing 12 months.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210729005278/en/
Investor Relations | Drew Mackintosh | 949-382-7838 |
investorrelations@nwhm.com
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