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Section 1: 8-K (8-K)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 3, 2019
 
 
 
 
397790014_image1a01a01a12.jpg 
The New Home Company Inc.
(Exact name of registrant as specified in its charter)
  
 
 
 
Delaware
 
001-36283
 
27-0560089
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
85 Enterprise, Suite 450, Aliso Viejo, California
 
92656
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
 
(949) 382-7800
 
 
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report.)
 
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý









Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.01 par value
 
NWHM
 
New York Stock Exchange
 
 
 

 





Item 2.02
Results of Operations and Financial Condition.
On May 3, 2019, The New Home Company Inc. (the “Company”), announced in a press release its financial results for the three month period ended March 31, 2019. A copy of the Company’s press release announcing these financial results is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished pursuant to this Item 2.02, including the exhibits attached hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act. In addition, the press release furnished as an exhibit to this report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Item 7.01
Regulation FD Disclosure.
In the Company's press release attached hereto as Exhibit 99.1, the Company announced that it will discuss its results for the three month period ended March 31, 2019, recent events and the Company's quarterly guidance for 2019 during a conference call on Friday, May 3, 2019 at 11:00 a.m. Eastern Time. As detailed in the press release attached hereto as Exhibit 99.1, a replay of this call will be available to all those who cannot listen to the live broadcast. Item 2.02 of this Current Report on Form 8-K is incorporated herein by reference.
The information in this Report (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed "filed" for purposes of the Exchange Act or otherwise subject to the liabilities of the Exchange Act. The information in this Report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 9.01
Financial Statements and Exhibits.
 
(d)
Exhibits

99.1
 
 
 
 
 
 
 








SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
Date: May 3, 2019
 
 
 
 
 
 
 
 
 
 
 
The New Home Company Inc.
 
 
 
 
 
 
 
 
By
 
/s/ John M. Stephens
 
 
 
 
 
 
  John M. Stephens,
  Chief Financial Officer






INDEX OF EXHIBITS
 

 
 
 
Exhibit No.
 
Description of Document
 
 
 
99.1
 
 
 
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


397790014_image5a01a01a39.jpg

THE NEW HOME COMPANY REPORTS 2019 FIRST QUARTER RESULTS

Aliso Viejo, California, May 3, 2019. The New Home Company Inc. (NYSE: NWHM) today announced results for the 2019 first quarter.

First Quarter 2019 Financial Results

Net loss of $2.0 million, or $(0.10) per diluted share, including $1.8 million of pretax severance charges, compared to net loss of $0.6 million, or $(0.03) per diluted share, for the 2018 first quarter
Adjusted net loss of $0.8 million*, or $(0.04)* per diluted share, excluding severance charges
Home sales revenue up 25% to $99.2 million; deliveries up 18%
Total revenues of $118.8 million vs. $123.2 million
Backlog dollar value of $212.6 million vs. $228.1 million
Ending community count up 22%
Repurchased $5.0 million of the Company's 7.25% Senior Notes due 2022
resulting in a pretax gain of $0.4 million
Repurchased 153,916 shares of common stock for $1.0 million

"Lower interest rates, moderating home prices, and improvement in the equity markets helped spur buyer demand and order activity during the first quarter, with March being the strongest month," said Larry Webb, Chairman and Chief Executive Officer of The New Home Company. "While sales demand and first quarter absorption rates were lower than the prior year first quarter, absorption rates were up 42% over the fourth quarter which led to a 62% sequential increase in net new orders. In addition, we made progress on our diversification strategy and increased home sales revenue by 25%, deliveries by 18% and home sales gross margins by 40 basis points over the prior year first quarter."

Mr. Webb continued, "We remain focused on repositioning our portfolio to include more affordable product where we believe sales demand is deeper and sales pace is more robust. We opened three new communities during the quarter with base pricing below $600,000 and anticipate opening three more during the second quarter at similar price points. In addition, we took steps to right-size our operations and cost structure by reducing headcount to better align our business with recent demand levels."

Mr. Webb concluded, "We continue to take steps to lower our cost structure, strengthen our balance sheet, pursue opportunities to reduce our leverage and thoughtfully allocate resources to best position the Company for long-term success. We acknowledge the challenges that currently face our business and believe our Company has the right team in place to generate long-term value for our shareholders."

First Quarter 2019 Operating Results

Total revenues for the 2019 first quarter were $118.8 million, compared to $123.2 million in the prior year period. Net loss attributable to the Company for the 2019 first quarter was $2.0 million, or $(0.10) per diluted share, compared to a net loss of $0.6 million, or $(0.03) per diluted share, in the prior year period. Adjusted net loss for the 2019 first quarter after excluding severance charges was $0.8 million*, or $(0.04)* per diluted share. The year-over-year decrease in income was primarily attributable to $1.8 million in pretax severance charges in the 2019 first quarter related to right-sizing our operations by reducing headcount, a 40 basis point increase in selling and marketing costs as a percentage of homes sales revenue, and a $0.7 million decrease in fee building margin due to lower fee construction activity. Partially offsetting these decreases was a 25% increase in home sales revenue, a 40 basis point increase in home sales

1



gross margin, a 10 basis point improvement in general and administrative costs as a percentage of home sales revenue (190 basis point improvement excluding severance costs*), and a $0.4 million gain on the early extinguishment of debt.

Wholly Owned Projects

Home sales revenue for the 2019 first quarter increased 25% to $99.2 million, compared to $79.4 million in the prior year period. The increase in home sales revenues was driven by an 18% increase in deliveries and to a lesser extent, a 6% increase in average selling price to $1.0 million. The higher year-over-year average selling price was impacted by mix, including pulling forward our first deliveries from our higher-priced Icon community in Scottsdale, Arizona where the average price topped $2.2 million.

Gross margin from home sales for the 2019 first quarter was 12.7% as compared to 12.3% in the prior year period. The 40 basis point increase was primarily due to a mix shift, which was partially offset by higher interest costs and incentives. Adjusted homebuilding gross margin for the 2019 first quarter, which excludes interest in cost of home sales, was 17.6%* compared to 15.7%* in the prior year period.

Our SG&A expense ratio as a percentage of home sales revenue for the 2019 first quarter was 16.2% versus 15.9% in the prior year period. The 30 basis point increase in the SG&A rate was primarily due to severance charges and higher amortization of capitalized selling and marketing costs related to a higher community count in the 2019 first quarter, and to a lesser extent, an amortization expense benefit in the 2018 first quarter in connection with adopting Accounting Standards Codification 606. These decreases were partially offset by improved leverage from higher home sales revenue and lower compensation expenses. Excluding severance charges, the SG&A rate was 14.4%*, a 150 basis point improvement as compared to the 2018 first quarter.

Net new home orders for the 2019 first quarter decreased 21% to 112 homes due to a slower monthly sales absorption rate, partially offset by an increase in average selling communities. The monthly sales absorption rate for the Company was 1.7 for the 2019 first quarter compared to 2.8 for the prior year period. The 39% decrease in the monthly absorption rate was due to weaker buyer demand as compared to the prior year, however, we did see a 42% sequential increase in the monthly absorption rate during the 2019 first quarter as compared to the 2018 fourth quarter. We ended the 2019 first quarter with 22 active communities as compared to 18 at the end of the 2018 first quarter, a 22% increase.

The dollar value of the Company's wholly owned backlog at the end of the 2019 first quarter was $212.6 million and totaled 204 homes compared to $228.1 million and 210 homes in the prior year period. The decrease in backlog dollar value resulted primarily from lower net new orders and a 4% lower average selling price of the homes in backlog at the end of the 2019 first quarter.

Fee Building Projects

Fee building revenue for the 2019 first quarter was $19.7 million, compared to $43.8 million in the prior year period. The decrease in fee revenues was largely due to lower construction activity in Irvine, California due to lower demand levels in that submarket. Management fees from joint ventures and construction management fees from third parties, which are included in fee building revenue, increased to $1.3 million for the 2019 first quarter as compared to $1.0 million for the 2018 first quarter. Our fee building gross margin for the 2019 first quarter was $0.4 million versus $1.1 million in the prior year period. The reduction in fee building margin was largely the result of lower fee building revenue and a $0.4 million decrease in management fees from joint ventures, which was partially offset by $0.7 million in construction management fees from third parties earned in the 2019 first quarter.


2



Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture income for the 2019 first quarter was $0.2 million as compared to $0.3 million in the prior year period, with the majority of the income generated from the Company's Mountain Shadows luxury community in Paradise Valley, Arizona. At the end of 2019 and 2018 first quarters, our joint ventures had six and seven actively selling communities, respectively.

Income Taxes

The Company's effective tax rate related to the income tax benefit for the 2019 first quarter was 25.0% as compared to 56.9% in the 2018 first quarter. The decrease is attributable to discrete items which resulted in a $0.4 million benefit in the 2018 first quarter primarily related to energy credits and a $0.3 million provision in the 2019 first quarter related to stock compensation and state tax rate changes.

Balance Sheet and Liquidity

As of March 31, 2019, the Company had real estate inventories totaling $563.1 million and owned or controlled 2,743 lots through its wholly owned operations (excluding fee building and joint venture lots), of which 1,090 lots, or 40%, were controlled through option contracts. The Company ended the 2019 first quarter with $41.9 million in cash and cash equivalents and $399.6 million in debt, of which $84.0 million was outstanding under its $200 million revolving credit facility. As of March 31, 2019, the Company had a debt-to-capital ratio of 62.8% and a net debt-to-capital ratio of 60.1%*.

Repurchase of Senior Notes and Stock

During March 2019, the Company repurchased and retired $5.0 million of its 7.25% Senior Notes due 2022 for a cash payment of approximately $4.5 million, which resulted in a $0.4 million pretax gain on the early extinguishment of debt.

The Company repurchased 153,916 shares of its common stock for approximately $1.0 million during the 2019 first quarter. The purchases were made under a previously announced stock repurchase plan with a remaining purchase authorization of $5.4 million as of March 31, 2019.

Guidance

The Company's current estimate for the 2019 second quarter is as follows:
Home sales revenue of $110 - $130 million
Fee building revenue of $15 - $20 million
Home sales gross margin of 12.0% - 12.5%

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 Friday, May 3, 2019 to review first quarter results, discuss recent events and results, and discuss the Company's quarterly guidance for 2019. 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 June 3, 2019 and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the pass code 13689425.



3



* Adjusted net loss, adjusted EPS, general and administrative costs excluding severance charges as a percentage of home sales revenue, selling, general and administrative costs excluding severance charges as a percentage of home sales revenue, adjusted homebuilding gross margin (or homebuilding gross margin excluding interest in cost of home sales) and net debt-to-capital ratio are non-GAAP measures. A reconciliation of the appropriate GAAP measure to each of these measures is included in the accompanying financial data. See “Reconciliation of Non-GAAP Financial Measures.”

About The New Home Company

NWHM is a new generation homebuilder focused on the design, construction and sale of innovative and consumer-driven homes in major metropolitan areas within select growth markets in California and Arizona, including Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The Company is headquartered in Aliso Viejo, California. For more information about the Company and its new home developments, please visit the Company's website at www.NWHM.com.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, anticipation, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. 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: 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 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.

Contact:
Investor Relations | Drew Mackintosh | 949-382-7838 | [email protected]

4



CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended March 31,
 
2019
 
2018
 
(Dollars in thousands, except per share amounts)
Revenues:
 
 
 
Home sales
$
99,186

 
$
79,437

Fee building, including management fees
19,662

 
43,794

 
118,848

 
123,231

Cost of Sales:
 
 
 
Home sales
86,569

 
69,694

Fee building
19,268

 
42,699

 
105,837

 
112,393

Gross Margin:
 
 
 
Home sales
12,617

 
9,743

Fee building
394

 
1,095

 
13,011

 
10,838

 
 
 
 
Selling and marketing expenses
(8,679
)
 
(6,639
)
General and administrative expenses
(7,391
)
 
(6,019
)
Equity in net income of unconsolidated joint ventures
184

 
335

Gain on early extinguishment of debt
417

 

Other income (expense), net
(193
)
 
(26
)
Pretax loss
(2,651
)
 
(1,511
)
Benefit for income taxes
664

 
860

Net loss
(1,987
)
 
(651
)
Net loss attributable to non-controlling interest

 
11

Net loss attributable to The New Home Company Inc.
$
(1,987
)
 
$
(640
)
 
 
 
 
Loss per share attributable to The New Home Company Inc.:
 
 
 
Basic
$
(0.10
)
 
$
(0.03
)
Diluted
$
(0.10
)
 
$
(0.03
)
Weighted average shares outstanding:
 
 
 
Basic
19,986,394

 
20,924,753

Diluted
19,986,394

 
20,924,753



5



CONSOLIDATED BALANCE SHEETS

 
March 31,
 
December 31,
 
2019
 
2018
 
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents
$
41,874

 
$
42,273

Restricted cash
116

 
269

Contracts and accounts receivable
16,459

 
18,265

Due from affiliates
681

 
1,218

Real estate inventories
563,112

 
566,290

Investment in and advances to unconsolidated joint ventures
33,032

 
34,330

Other assets
35,366

 
33,452

Total assets
$
690,640

 
$
696,097

 
 
 
 
Liabilities and equity
 
 
 
Accounts payable
$
20,638

 
$
39,391

Accrued expenses and other liabilities
33,332

 
29,028

Unsecured revolving credit facility
84,000

 
67,500

Senior notes, net
315,591

 
320,148

Total liabilities
453,561

 
456,067

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, 20,049,113 and 20,058,904, shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
200

 
201

Additional paid-in capital
192,169

 
193,132

Retained earnings
44,634

 
46,621

Total stockholders' equity
237,003

 
239,954

Non-controlling interest in subsidiary
76

 
76

Total equity
237,079

 
240,030

Total liabilities and equity
$
690,640

 
$
696,097




6



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
 
March 31,
 
2019

2018
 
(Dollars in thousands)
Operating activities:
 
 
 
Net loss
$
(1,987
)
 
$
(651
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Deferred taxes

 
(1,481
)
Amortization of stock-based compensation
566

 
842

Distributions of earnings from unconsolidated joint ventures
260

 
715

Abandoned project costs
5

 
35

Gain on early extinguishment of debt
(417
)
 

Equity in net income of unconsolidated joint ventures
(184
)
 
(335
)
Deferred profit from unconsolidated joint ventures

 
136

Depreciation and amortization
2,656

 
1,022

Net changes in operating assets and liabilities:
 
 
 
Contracts and accounts receivable
1,806

 
5,824

Due from affiliates
524

 
485

Real estate inventories
9,676

 
(37,529
)
Other assets
(2,343
)
 
87

Accounts payable
(18,753
)
 
9,867

Accrued expenses and other liabilities
(4,041
)
 
(8,459
)
Net cash used in operating activities
(12,232
)
 
(29,442
)
Investing activities:
 
 
 
Purchases of property and equipment
(5
)
 
(72
)
Contributions and advances to unconsolidated joint ventures
(1,335
)
 
(4,273
)
Distributions of capital and repayment of advances from unconsolidated
joint ventures
2,562

 
2,264

Interest collected on advances to unconsolidated joint ventures

 
129

Net cash provided by (used in) investing activities
1,222

 
(1,952
)
Financing activities:
 
 
 
Borrowings from credit facility
30,000

 

Repayments of credit facility
(13,500
)
 

Repurchases of common stock
(1,042
)
 

Repurchase of senior notes
(4,512
)
 

Tax withholding paid on behalf of employees for stock awards
(488
)
 
(954
)
Net cash provided by (used in) financing activities
10,458

 
(954
)
Net decrease in cash, cash equivalents and restricted cash
(552
)
 
(32,348
)
Cash, cash equivalents and restricted cash – beginning of period
42,542

 
123,970

Cash, cash equivalents and restricted cash – end of period
$
41,990

 
$
91,622



7



KEY FINANCIAL AND OPERATING DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
2019
 
2018
 
% Change
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
Southern California
61

 
$
64,593

 
$
1,059

 
44

 
$
44,580

 
$
1,013

 
39
 %
 
45
 %
 
5
 %
Northern California
28

 
18,739

 
669

 
40

 
34,857

 
871

 
(30
)%
 
(46
)%
 
(23
)%
Arizona
10

 
15,854

 
1,585

 

 

 
NA

 
NA

 
NA

 
NA

Total
99

 
$
99,186

 
$
1,002

 
84

 
$
79,437

 
$
946

 
18
 %
 
25
 %
 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
2019
 
2018
 
% Change
Net New Home Orders:
 
 
 
 
 
Southern California
58

 
69

 
(16
)%
Northern California
45

 
70

 
(36
)%
Arizona
9

 
2

 
350
 %
 
112

 
141

 
(21
)%
 
 
 
 
 
 
Selling Communities at End of Period:
 
 
 
 
Southern California
12

 
10

 
20
 %
Northern California
8

 
7

 
14
 %
Arizona
2

 
1

 
100
 %
 
22

 
18

 
22
 %
 
 
 
 
 
 
Average Selling Communities:
 
 
 
 
 
Southern California
12

 
10

 
20
 %
Northern California
7

 
7

 
 %
Arizona
2

 

 
NA

 
21

 
17

 
24
 %
 
 
 
 
 
 
Monthly Sales Absorption Rate per Community (1):
 
 
 
 


Southern California
1.6

 
2.3

 
(30
)%
Northern California
2.0

 
3.5

 
(43
)%
Arizona
1.5

 
2.0

 
(25
)%
Total
1.7

 
2.8

 
(39
)%
Backlog:
As of March 31,
 
2019
 
2018
 
% Change
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
Southern California
87

 
$
109,284

 
$
1,256

 
96

 
$
125,747

 
$
1,310

 
(9
)%
 
(13
)%
 
(4
)%
Northern California
85

 
72,290

 
850

 
112

 
98,124

 
876

 
(24
)%
 
(26
)%
 
(3
)%
Arizona
32

 
30,991

 
968

 
2

 
4,248

 
2,124

 
1,500
 %
 
630
 %
 
(54
)%
Total
204

 
$
212,565

 
$
1,042

 
210

 
$
228,119

 
$
1,086

 
(3
)%
 
(7
)%
 
(4
)%

(1) Monthly sales absorption represents the number of net new home orders divided by the number of average selling communities for the period.


8



Lots Owned and Controlled:
 
 
 
 
 
 
As of March 31,
 
 
 
 
 
 
 
2019

2018
 
% Change
Lots Owned
 
 
 
 
 
 
 
 
 
 
 
Southern California
 
 
 
 
 
 
626

 
540

 
16
 %
Northern California
 
 
 
 
 
 
726

 
317

 
129
 %
Arizona
 
 
 
 
 
 
301

 
299

 
1
 %
Total
 
 
 
 
 
 
1,653


1,156

 
43
 %
Lots Controlled (1)
 
 
 
 
 
 
 
 
 
 
 
Southern California
 
 
 
 
 
 
174

 
433

 
(60
)%
Northern California
 
 
 
 
 
 
439

 
992

 
(56
)%
Arizona
 
 
 
 
 
 
477

 
343

 
39
 %
Total
 
 

 
 
 
1,090

 
1,768

 
(38
)%
Lots Owned and Controlled - Wholly Owned
 
 
 
 
 
 
2,743

 
2,924

 
(6
)%
Fee Building (2)
 
 
 
 
 
 
1,266

 
963

 
31
 %
Total Lots Owned and Controlled
 
 
 
 
 
 
4,009

 
3,887

 
3
 %
 
(1) Includes lots that we control under purchase and sale agreements or option agreements subject to customary conditions and have not yet closed. There can be no assurance that such acquisitions will occur.
(2) Lots owned by third party property owners for which we perform construction services.
Other Financial Data:
Three Months Ended 
 March 31,
 
2019
 
2018
Interest incurred
$
7,761

 
$
6,716

Adjusted EBITDA(1)
$
6,906

 
$
3,563

Adjusted EBITDA margin percentage (1)
5.8
%
 
2.9
%
 
 
 
 
 
LTM(2) Ended March 31,
 
2019

2018
 
 
 
 
Interest incurred
$
29,422

 
$
26,658

Adjusted EBITDA(1)
$
43,241

 
$
48,747

Adjusted EBITDA margin percentage (1)
6.5
%
 
6.5
%
Ratio of Adjusted EBITDA to total interest incurred(1)
1.5
x
 
1.8x

 
 
 
 
 
March 31,
 
December 31,
 
2019
 
2018
Ratio of debt-to-capital
62.8
%
 
61.8
%
Ratio of net debt-to-capital(1)
60.1
%
 
59.0
%
Ratio of debt to LTM(2) Adjusted EBITDA(1)
9.2x

 
9.7
x
Ratio of net debt to LTM(2) Adjusted EBITDA(1)
8.3x

 
8.6x

Ratio of cash and inventory to debt
1.5x

 
1.6
x
 
(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.


















9



KEY FINANCIAL AND OPERATING DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
 
% Change
Financial Data - Unconsolidated Joint Ventures:
 
 
 
 
 
Home sales revenue
$
38,127

 
$
31,240

 
22
 %
Land sales revenue
4,160

 
773

 
438
 %
Total revenues
$
42,287

 
$
32,013

 
32
 %
 
 
 
 
 
 
Net income
$
513

 
$
804

 
(36
)%
 
 
 
 
 
 
Operating Data - Unconsolidated Joint Ventures:
 
 
 
 
 
New home orders
36

 
36

 
 %
New homes delivered
37

 
32

 
16
 %
Average selling price of homes delivered
$
1,030

 
$
976

 
6
 %
 
 
 
 
 
 
Selling communities at end of period
6

 
7

 
(14
)%
Backlog homes (dollar value)
$
70,949

 
$
67,244

 
6
 %
Backlog (homes)
75

 
84

 
(11
)%
Average sales price of backlog
$
946

 
$
801

 
18
 %
 
 
 
 
 
 
Homebuilding lots owned and controlled
174

 
309

 
(44
)%
Land development lots owned and controlled
1,995

 
2,321

 
(14
)%
Total lots owned and controlled
2,169

 
2,630

 
(18
)%


10



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

In this earnings release, we utilize certain non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they, and similar measures, are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following table reconciles net income (loss) attributable to the Company to the non-GAAP measure of adjusted net income (loss) attributable to the Company (net income (loss) before severance charges) and earnings (loss) per share and earnings (loss) per diluted share attributable to the Company to the non-GAAP measures of adjusted earnings (loss) per share and adjusted diluted earnings (loss) per share attributable to the Company (earnings (loss) per share before severance charges). We believe removing the impact of severance costs provides investors with an understanding of the impact these items had on earnings and provides a better understanding of operational performance in the current quarter.
 
 
Three Months Ended March 31,
 
2019
 
2018
 
(Dollars in thousands, except per share amounts)
Net loss attributable to The New Home Company Inc.
$
(1,987
)
 
$
(640
)
Severance charges, net of tax
1,157

 

Adjusted net loss attributable to The New Home Company Inc.
$
(830
)
 
$
(640
)
 
 
 
 
Loss per share attributable to The New Home Company Inc.:
 
 
 
Basic
$
(0.10
)
 
$
(0.03
)
Diluted
$
(0.10
)
 
$
(0.03
)
 
 
 
 
Adjusted loss per share attributable to The New Home Company Inc.:
 
 
 
Basic
$
(0.04
)
 
$
(0.03
)
Diluted
$
(0.04
)
 
$
(0.03
)
 
 
 
 
Weighted average shares outstanding:
 
 
 
Basic
19,986,394

 
20,924,753

Diluted
19,986,394

 
20,924,753

 
 
 
 
Severance charges
$
(1,788
)
 
$

Less: Related tax benefit
631

 

Severance charges, net of tax
$
(1,157
)
 
$

 
 
 
 
Loss per share attributable to The New Home Company Inc. related to severance charges
 
 
 
Basic
$
(0.06
)
 
NA
Diluted
$
(0.06
)
 
NA


11




RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)

The following table reconciles the Company’s SG&A rate as a percentage of home sales revenue calculated in accordance with GAAP to the non-GAAP measure, SG&A rate excluding severance charges. During the 2019 first quarter, the company incurred severance charges related to right-sizing our 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 prior year rates that do not include these charges.

 
Three Months Ended 
 March 31,
 
As a Percentage of Home Sales Revenue
 
 
 
2019
 
2018
 
2019
 
2018
 
(Dollars in thousands)
Selling and marketing expenses
$
8,679

 
$
6,639

 
8.8
 %
 
8.4
%
General and administrative expenses ("G&A")
7,391

 
6,019

 
7.4
 %
 
7.5
%
Total selling, marketing and G&A expenses ("SG&A")
$
16,070

 
$
12,658

 
16.2
 %
 
15.9
%
 
 
 
 
 
 
 
 
G&A
$
7,391

 
$
6,019

 
7.4
 %
 
7.5
%
Less: Severance charges(1)
$
(1,788
)
 
$

 
(1.8
)%
 
%
G&A, excluding severance charges
$
5,603

 
$
6,019

 
5.6
 %
 
7.5
%
 
 
 
 
 
 
 
 
Selling and marketing expenses
$
8,679

 
$
6,639

 
8.8
 %
 
8.4
%
G&A, excluding severance charges
$
5,603

 
$
6,019

 
5.6
 %
 
7.5
%
SG&A, excluding severance charges
$
14,282

 
$
12,658

 
14.4
 %
 
15.9
%
(1) Includes $1.1 million related to departure of executive officer.

The following table reconciles homebuilding gross margin percentage as reported and prepared in accordance with GAAP to the non-GAAP measure, adjusted homebuilding gross margin (or homebuilding gross margin excluding interest in cost of home sales). We believe this information is meaningful, as it isolates the impact leverage has on homebuilding gross margin and provides investors better comparisons with our competitors, who adjust gross margins in a similar fashion.

 
Three Months Ended March 31,
 
2019
 
%
 
2018
 
%
 
(Dollars in thousands)
Home sales revenue
$
99,186

 
100.0
%
 
$
79,437

 
100.0
%
Cost of home sales
86,569

 
87.3
%
 
69,694

 
87.7
%
Homebuilding gross margin
12,617

 
12.7
%
 
9,743

 
12.3
%
Add: Interest in cost of home sales
4,852

 
4.9
%
 
2,764

 
3.4
%
Adjusted homebuilding gross margin
$
17,469

 
17.6
%
 
$
12,507

 
15.7
%
 
 
 
 
 
 
 
 





12



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.
 
March 31,
 
December 31,
 
2019
 
2018
 
(Dollars in thousands)
Total debt, net of unamortized discount, premium and debt issuance costs
$
399,591

 
$
387,648

Equity, exclusive of non-controlling interest
237,003

 
239,954

Total capital
$
636,594

 
$
627,602

Ratio of debt-to-capital(1)
62.8
%
 
61.8
%
 
 
 
 
Total debt, net of unamortized discount, premium and debt issuance costs
$
399,591

 
$
387,648

Less: Cash, cash equivalents and restricted cash
41,990

 
42,542

Net debt
357,601

 
345,106

Equity, exclusive of non-controlling interest
237,003

 
239,954

Total capital
$
594,604

 
$
585,060

Ratio of net debt-to-capital(2)
60.1
%
 
59.0
%

(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.

13



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 and equity in net income (loss) of unconsolidated joint ventures, (d) severance charges (e) noncash impairment charges and abandoned project costs, (f) gain from early extinguishment of debt (g) depreciation and amortization, (h) amortization of stock-based compensation and (i) income (loss) from unconsolidated joint ventures. Adjusted EBITDA margin percentage is calculated by dividing Adjusted EBITDA by total revenue for a given period. The ratio of Adjusted EBITDA to total interest incurred is calculated by dividing Adjusted EBITDA by total interest incurred for a given period. The ratio of debt to Adjusted EBITDA is calculated by dividing debt at the period end by Adjusted EBITDA for a given period. The ratio of net debt to Adjusted EBITDA is calculated by dividing debt at the period end less cash, cash equivalents and restricted cash by Adjusted EBITDA for a given period. Other companies may calculate Adjusted EBITDA differently. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, interest costs, tax position, level of impairments and other non-recurring items. Due to the significance of the GAAP components excluded, Adjusted EBITDA should not be considered in isolation or as an alternative to net income (loss), cash flows from operations or any other performance measure prescribed by GAAP. A reconciliation of net income (loss) to Adjusted EBITDA, and the calculations of Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, the ratio of debt to Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are provided in the following table.

 
Three Months Ended
 
LTM(1) Ended
 
March 31,
 
March 31,
 
2019
 
2018
 
2019
 
2018
 
(Dollars in thousands)
Net income (loss)
$
(1,987
)
 
$
(651
)
 
$
(15,566
)
 
$
15,654

Add:
 
 
 
 
 
 
 
Interest amortized to cost of sales and equity in net income of unconsolidated joint ventures
4,883

 
2,795

 
21,996

 
12,301

(Benefit) provision for income taxes
(664
)
 
(860
)
 
(5,879
)
 
14,006

Depreciation and amortization
2,656

 
1,022

 
8,265

 
1,348

Amortization of stock-based compensation
566

 
842

 
2,814

 
3,034

Cash distributions of income from unconsolidated joint ventures
260

 
715

 
260

 
715

Severance charges
1,788

 

 
1,788

 

Noncash inventory impairments and abandonments
5

 
35

 
10,176

 
2,584

Less:
 
 
 
 
 
 
 
Gain from early extinguishment of debt
(417
)
 

 
(417
)
 

Equity in net (income) loss of unconsolidated joint ventures
(184
)
 
(335
)
 
19,804

 
(895
)
Adjusted EBITDA
$
6,906

 
$
3,563

 
$
43,241

 
$
48,747

Total Revenue
$
118,848

 
$
123,231

 
$
663,183

 
$
749,374

Adjusted EBITDA margin percentage
5.8
%
 
2.9
%
 
6.5
%
 
6.5
%
Interest incurred
$
7,761

 
$
6,716

 
$
29,422

 
$
26,658

Ratio of Adjusted EBITDA to total interest incurred
 
 
 
 
1.5
x
 
1.8
x
Total debt at period end
 
 
 
 
$
399,591

 
$
319,029

Ratio of debt to Adjusted EBITDA
 
 
 
 
9.2
x
 
6.5
x
Total net debt at period end
 
 
 
 
$
357,601

 
$
227,407

Ratio of net debt to Adjusted EBITDA
 
 
 
 
8.3
x
 
4.7
x
Total cash and inventory
 
 
 
 
$
604,986

 
$
550,449

Ratio of cash and inventory to debt
 
 
 
 
1.5x

 
1.7
x
(1) "LTM" indicates amounts for the trailing 12 months.




14
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