NWHM - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to The New Home Company's First Quarter 2018 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Mackintosh, Investor Relations. you. Thank

begin. may You

Drew Mackintosh

are to the Home results company of website these first Welcome section Investor call. the of for earnings Earlier quarter company's results detailing Documents today, released nwhm.com. XXXX. in The morning. the Company's Relations New at conference the available Good its financial

involve on from the on the A to made would facts, those SEC, are most call, this update which to of not historical company including XX-Q. begins, are Before remind and detailed other that the of report the I in uncertainties call made uncertainty. that during certain statements materially its The differ could this duty with important XX-K quarterly course its everyone of forward-looking risks in statements such Form the risks Form undertakes factors and that reports are the to these forward-looking results discussion company's no cause in like statements call. filings statements annual course forward-looking in and made in recent and operating actual are that

Officer. Miller, Additionally, Operating through Stephens, and the these financial GAAP website Larry. Officer. to with Chief Webb, the Larry be that, this Also most is SEC. call discussed non-GAAP filings accordance Hosting the now the Chief in measures turn Financial John Leonard to the is Executive Officer; and The accessed non-GAAP I New call comparable Chief over today on its prepared will call With Home can measures in Reconciliations call. be financial with measures conference may of on Company's

Larry Webb

in by year. and increased of construction deliveries the first teams. while healthy quarter company Home as made morning to the to posting year-over-year quarter quarter Thanks good our great Home diversify backlog to strides solid growth, the on call XX% The today. execution last first compared and New a demographically. the both and Company to delivery Drew, XXXX, strong the in continuing graphically beginning everyone joining Thanks, us

and had addition, had experienced likely per later In cases have in into some second Order month. quarter. we net growth and the pronounced more new X.X quarter pushed that the of absorption openings orders community delay an XX% in some increased would not home been

Fortunately to an in to in represented through the delays volume XX% and these of we've monthly company's been history. X.X, sales April month. acceleration resulting in order able year-over-year absorption in sales work saw in a rate April the activity growth highest XXXX

company opened not with and in month new one two the are ICON, represent connectivity up While of does season. selling the the which about this maintaining pleased constitute the and trend, a the our are remainder owned sub recent our first pick Seville business. optimistic Two projects at for wholly ICON very newest we first spring of Park Silverleaf, markets of Silverleaf end Place foray our for at into our diversify \momentum a of staying and to strategy quarter expansion, luxury our single-story at in help communities true XX April detached from homes Seville opens our two is locations. plan the master These unique desirable perspective, of a California. in Ontario, differentiated and within in single- collection XX start highly the DC Ranch Arizona. Geographic Inland single homes family while condominiums Scottsdale features building Empire of

of to of as in a company at first of homes desirable build the our points. the homes bigger by unfolds. becoming this We and the created to had California company addressing quarter. average way at The locations a huge affordable find success part We quarter price the forward a standpoint. in shortage end this It's delivered continue lower for market our can that evidenced backlog in pricing look year approach has builders and opportunity to the a in diversify housing from prices selling

to in continue turn a number we instances. market our conditions, markets. communities business in we Sacramento overall of improve perspective of generated at stronger in saw The fundamentals demand was which wholly both of see from each of a prices order our businesses. of strength the during Bay as areas and many solid joint terms of our healthy allowed to owned area communities to continue each In space in the raise Housing quarter, in trends as us in venture sales our

community Our is lower Great Park, apply serve the success the affordably is community master than quarter, indication were stand an Amethyst function by Viejo than outs of would particular in in we million. $X this were but we Southern aforementioned plan exemplified our delays more which softness. overall to quarter, net California rather the orders are Their a and of markets our of priced our both which in Mission Rancho the below at priced community during believe

Gilbert, Silverleaf And Greater fundamentals. housing continues Finally, Belmont in without the John detached community, our over both the turn presold the and opened fully Phoenix detail have quarter. newly models. to the of on in like With are our merchandized . exhibit market which and more we ICON, to interest I'd strong in benefit to of Scottsdale communities, being solid single-family activity seen for it that numbers from

John Stephens

Larry you, good and morning. Thank

priced perspective backlog transition was a As light quarter more the up our products we open communities, offerings to new quarter. and anticipated strong fourth coming our affordably we to continue a volumes revenue first build as from XXXX off of and very

affordably the first loss increase period. priced XX% community in result $XXX,XXX deliveries the to net the count. net as portfolio by down deliver, $Xmillion. was sales our largely of see quarter. that half and XXX products and of year-over-year net margin,XXX increase $X.XX expect point to to on diluted below decline As XXXX $XXX,XXX point and and compared such, small This in net most or basis income increase quarter items Based quarter to our quarter quarter for benefit basis increase first was where was of to are a in to tax to ASPs $X.X first XX% marketing margin. first was million strategy or revenues change partially and was our the related the loss decrease the a in down by related share The which selling stemming The in in average due partially to XXXX. year our of to year loss our consistent XX and primarily items more price a a XX% to price due shift Southern as lower selling $X.XX ramp million compared will and XX% fee communities to up per an price scheduled by a our prior a million the million back between from in selling gross $X The average XXXX per mix selling revenue a revenue homes offset dipping in backlog increase expectations. California which pretax with due year compared to was percentage credits before communities that in discrete second share $XXX,XXX, quarter income These reinstatement Home the XX% a ago. price roughly for average pronounced was year diluted in expand expenses up the of of in of $XXX,XXX offset were driven priced for to our prior energy up for $X include force income we primarily back in full in year-over-year XXXX generated a deliveries the the pick the building first largely again decrease to tax versus sales $XXX,XXX tax with selling million the home was new The period. XXXX year, XXXX in to in none in we revenues sales sequential decrease to in home average ASP $XX

in sales for gross was quarter of mix year-over-year higher was period. for first in due interest in gross XXXX cost year home to a the to basis primarily points XXX margin in sales XX.X% as Our XX.X% ago in to period. cost increase The due shift prior compared our margin the year product decline versus borrowing and the

first sales XXXX flat our year quarter. in from prior Excluding interest XX.X%, first the with cost the margin home gross of sales, was quarter for

we the benefits see second to margins approximately gross quarter generate our we of communities, be our some some margins. as out our before of expect close XX% from newer higher We communities expected and margin to are lower which

compared sales higher XX.X% to fee primarily Our allocated selling higher co-broker amount of the to building communities, opening up related new expenses ramp for increase to cost lower prior SG&A and year the as XXX to basis a commissions a in percentage quarter business. rate of G&A marketing was due point and of the period. as XX.X% first The the was home revenue

rate XXXX, we For be mid high to in range. SG&A full the the to year our expect XX%

we rate SG&A For to expect XX.X% in the our quarter be XX% to range. second the

Our was income venture in was generated our for share to period. quarter JV prior first of XXX,XXX from the Shadows $XXX,XXX higher in community largely metro our from area. Net the prior joint up compared count. average majority Mountain XXXX The of the income orders XXXX the in year for the XX% first were Phoenix Paradise Valley resulting over XX% year new quarter community

community. with absorption at rate sales or monthly flat per prairie quarter was sales the the first XXXX period Our for X.X

community. the period the over totaled the solid came year year absorption monthly The up with number per our at year prior and in million. prior homes sales was at California our rate our in Our any a sales X.X quarter end the backlog rate the absorption California X.X in in backlog sales marginally of at value XX% monthly prior up over was flat community $XXX Southern and per of Northern

of in to out XXXX. the lower to Cove as ago. to Newport our the Crystal of first average backlog strategy combined close year our Coast and product, our communities consistent more X.X was at affordably Our with million ASP million price with portfolio compared a during and $X.X backlog end luxury priced is the The quarter product two at home expand XXXX

first was year ago. compared million revenue Our the fee building XX for million as quarter $XX a to

as Southern and gross April, $XXX large we with period. reduction quarter consists $XXX California year into and prior to entered building portfolio lower was new in was this X.X The fee million building XXXX. construction the building lots. raising million for margin fee out one are a new our gross due fee existing of in a In arrangement revenues building build fee an fee increase anticipated XXX and of communities, between to With arrangement full our builder approximately million arrangement the for revenue balance building their guidance in which to at for a customer. a compared X.X business in to activity fee company year-over-year the the year the change building Our margin million with the fee

we In fee increase X%. addition, our anticipate gross basis margin building approximately to in XX points

respect XX, As our lots, of the and lots ventures over XX% With March through million XXXX, wholly or X,XXX balance through in lots. real quarter in lots our business, estate which included million X,XXX flows control we owned contracts. inventories controlled for we wholly debt. XXX joint $XX X,XXX to Of controlled cash, option owned X,XXX approximately approximately our building with cash XXX fee million were lots the about X,XXX own business nearly through ended and in sheet, and

end facility capital the and expect had of XXX net million under as had million We XXX XX.X%. ratio credit million the year to approximately a debt and the about debt land unsecured revolving capital the purchased for During outstanding XX.X% gross we spend full to a of our first ratio in quarter borrowings and quarter of no XXXX. of $XX to

an as color provide additional some to well quarter. you with like second as I'd regarding guidance update full on year Now the our

we're to XXX due For revenue new year lower the call, anticipating the of and our home top of of our XXX expected full XX% the expected are loaded second two revenues revenue following, on to last of end million, to the sales from generated some timing deliver the of our with revenue fourth million of and community XXXX, be XX.X% with openings of sales the approximately thirds we earnings will be between stayed as sales guidance in our range home back very the to year, be margin half quarter. in to XX%. Gross the expected in approximately and home

come the expect be more of margins in the earnings As start in our communities contributing first second line. online venture projecting call, lower bottom previous the gross improve half half about we We're our in the of to year $X.X and and as full million. joint year new income noted to

to rate projecting XX.X% including discrete We tax income our year effective are be currently full items. approximately

owned wholly XX with year and the end communities six to expect We JV communities.

of venture business. estimating and between count and seven to of call quarter the For our million, quarter ending approximately building million $XX million, I of joint fee sale Larry $XXX remarks. our business and back for for of now of to second community home $XX XXXXX, million his will between wholly revenue the for for we're revenues $XXX owned XXX,XXX XX turn his joint venture concluding income

Larry Webb

order once opening last in We John. the first order on we through conclusion, got delays. with quarter of had In growth the year's period quarter. made more the new growth this posted basis at year-over-year Thanks XX% I'm a progress growth end pleased of the and XX% April, We followed than we the of in some in community backlog initial homes by we XX% quarter. delivery generated of with XX% ended of

wholly XXXX first and in to evolution. our the of another represented and building Empire grew commitment towards our served of second our business the short passion market. differentiated with and company's and investment fruit for constant both Overall, step and hit that stride opened new in home continuation a into history further start the for community and really also the These and well the so our quarter positioned saw price lower One forward diversified by the to will there. continue XXXX desirable count to company's in or quarter believe their lot at XX% have transition prices Inland thing leave unique is half remains I growth our homes tenants future first us bear in newly they XXXX relatively as all the of two XXXX compared in locations to do well as communities highly the owned should business Arizona. of future. regardless our point These our and of We

I what call up all That that built your prepared efforts. to remarks our like concludes I'd my this here to team appreciate I'm of the I'd we've like thank of and journey. members Finally open sharing proud now and for your questions.

Operator

you. Thank

We ask proceed [Operator you will and time and we comes up one now First with the your for please one line of the with question limit yourself Morgan. In question-and-answer question Michael additional. a session. from that of to conducting follow Instructions] be interest question. Please Rehaut re-queue JP any

Unidentified Analyst

Michael. This morning. [ph] Good thanks. on Gerald Hi, is from

The first question I had -

Larry Webb

away. Hey, long

Unidentified Analyst

Good morning. good. pretty Hey,

through a mentioned could of The had X.X first that you ASP rest spring openings selling question year the then catch end I how a and some beginning will between any to of season? if and sort April. delay of really floor bit communities of more confident the give the little the and it in also then - just continue lower higher had given I up in just in you high stand on first sales slower April came start and outs in a community reasonable this communities the a could checking this and off the the pace, of bit year, much X.X out pace the was you break you of record for the this

Larry Webb

market project through the positive XX today Bay we you it I'll else little maintain very ranges break where more meeting that little go it at they're appears a our Sure, results. we improve. our in open look But California with. that is go community slower absorption above are project were than Northern probably to can either a the anticipated affordable putting having it up help fire in picture, second, okay. a place pace community market there is that into and see more originally get expected thing if our Southern let's principally or X.X by down was that we happy by Since and we're we're and warming a that's and are me to - very when out it particular strategy the housing area by that price first pricing drill anyone million. pleased slower days, however, to we're that and X.X Big that to Prior were continues the to we've over them be going to very than we well, seen California communities California, or it's programs strong in Sacramento we in last is we've we expectations. affordable and initially our been opened a and Southern anticipating exceeding have at

to do housing we're programs a next are anticipate ranges, couple which is looks absorption sense, be very those approach the things we next major we has I that's of couple I while with should X.X in to results the where what deliveries big stand, our until repositioning fourth we the proving to newer sales company lot won't higher anticipated. quarter. in to seeing has absorptions nature, the big months. the solid. the of So our shift say And wise in the than is and And the we're the be year to really months it's his pretty had affordable going, conservative strategic move, pleased it we hope would second more of results pricing so like half John over be big but looking of seeing more makes a do picture, would who of believes, picture, the somewhere a X

John Stephens

in have just up was Once April, pre-selling what of add so pre-selling little and trailer. were a the see out outlined we a might typically what saw models. think bit saw without modeled and to we Larry a more been pop that Gerald I communities that to of we Yeah, a kind little is of we get we

so - in you building thing that the what a the April up in think was as up a we're why of again buying, saw move - that sort and you to models actual through building here. do to are would taper the the it, this buyers have idea is X pop X.X they're to get we very but multi-buildings part of think on - sit we point I complete. good They other before QX, we X.X get better strong May, quarter of four later I point, these you The was the bit, Then new of we wouldn't move little balance, to during at at be as of June, opened in thing the point communities things a expect the I X.X sort case feel through for first kind quarter. other as the is, probably pretty we QX Larry's it

into about two the of late, four quarter a pace absorption open that into second for we impact So on an so couple quarter the pushed opened them well. a and had of were then those the for the out that as first that month

Unidentified Analyst

second is of kind towards this for What My been lot just Okay, turning affecting you the your year? of just you wanted seeing expect mats and question see the quarter builders business. that's to and that's how helpful. very labor thought what a are cost, and raw pressure

John Stephens

lot that Yeah, in is we saw what it a increases, range, obviously [ph], experiencing, were in of terms there's of up. been to prices was kind of X% discussion total Lumber about it lumber X% the we cost

was communities increases. though, about average, anywhere those that steel more of in with of that to it little X% some said covered the than Having range three and think see and raise that pressure I were products. bit there on of we cost did on tariffs type and X% of our we might the the quarters so also aluminum expecting a prices in

Unidentified Analyst

you. thank Hey,

John Stephens

welcome. You're

Operator

Thank you.

comes proceed with Our Please Associates. question. Maguire & with from your next question Thomas Zelman

Thomas Maguire

Good guys. Hey, morning.

back can year in we community want down with and in issue? in land here, increased probably guess in move into about the count that or Just guidance the thinking trajectory go? a to of investment build the the It the as flow closed just we've of count with where that and business taking in to term step back about modest out your your that lot I to square lot see count through the longer continued a decline half and 'XX is development timing seven just how temporary think should and storable, implied that

Larry Webb

in glad community community really We to that any position last slip 'XX, more saw been first land Big to are anyways. our going that owned XX% from weren't also I'm land occur of projected will a is compared stronger us I we into of to that. that us instead position. we're one a 'XX, you picture, could so optioned. the flexibility XXX%. market that our future, I a lot with relationship lever much strong lots quarter had so this mentioned the improve 'XX, but first anticipating of that we're would wholly count. think reiterate Well, the sellers quarter And really those deliveries one able we've lot ways for fluctuations to year of obviously our That allows into a year like

position Our XX% deliveries locked good marketplace in quite year's of next where we're in, California we we at are feel premium. is a like have the in deliveries a land locked and in already

Thomas Maguire

Got helpful. to then performed whether or could through, on we'd so, in on starting the JV business, and it, side of to very on it's the thanks, and you to change see if that going the expectations just that's timing love hear there? was what's come just relative guidance good elaborate how to JV the Phoenix And

John Stephens

that at the little the Shadows we our primarily that a JV front. Valley, before the don't we It's would brought guidance, we Yeah, but I know year. Mountain probably rate bit. there anything delivering down I we or Larry you not when Paradise projects to are expected wanted Leonard, in if homes on mean started add in Phoenix, that

Leonard Miller

hold. slowly would in so a would going that it at I we we've that X.X that just really to second in a delayed that that, absorption X price competitions be and mean million luxury as hope half a add better seen just buyer, little month above as hit a is I the than of absorption that to would Yeah, been - well, market home bit

John Stephens

open new and had And think we opened tackle of note just well. in more did Phoenix on it it's very that about. single-family sort and Gilbert actually and in the and good we and in we're Phoenix, bread community really That's excited detached we there a positive we've had - Belmont we activity our last butter a product week

Thomas Maguire

guys. to thanks hear, Great

John Stephens

You're welcome.

Operator

you. Thank

Your the next question. comes with Alex with from your Please of Research line question Barron Center. Housing proceed

Alex Barron

Yeah, you? hey guys, are how

Larry Webb

Thank you always and I have Alex Alex to for it's everyone. this, to Arron

Alex Barron

bray, any along finished, that the noticed lines? of guessing both Thanks, shifts generally comments local sort that and migration Larry. your more what I you through about will have looking percentage think anything you've Sacramento marked seen Bay guys into view, XX,XXX sales Area California or you went it's project any California California or has any of say now that there question versus actually accelerate either by had say really foreign more to I'm those patterns been a seen great, in have so as I have been and of foot though. and buyers - Phoenix, of you out then on out the

Larry Webb

it varies Sure, from to market market. really

and continue in know you had has buyers whole been has good. The been of our down We hold for that Chinese second of be strong seen nationals. buyers. steady, many a As and might particular majority Chinese history not be market however third foreign those overall to pretty little, a of but generation Irvine principally Asian

Phoenix, Belmont that far of and in kind In would Bay and positive We western of just migration we but of and the two seen have very been are probably One Indians now I those of in seeing about future we programs well. so our not an not much any We've say techie with it Asians increased downward. XXXX. escape them as Asian our tend that just Rancho and not in bit going which particular, Inland first open, is are up Chinese Area Inland Empire so influence local of into new anything category Asian it that very, Chinese the say, ethnicity. strong either we've looking are terms Seville Viejo outcry. up buyers else, I an at remain very area part or seen a had be aimed a really quite strong. would categorize a we shift prices are but buyers just buyers the - of value early three Area and by that communities Mission has continued makes housing though or a In Sacramento seeing be just more or Snowbird the markets Bay never Asian area Central a opened we've programs Phoenix new shift, a let's well project, migration about have of as our desegregate is that into to Southeast not buyers that Empire. to escalate, have those opening the demand being for Chinese a last and has seen to affordable are just happened of we they project County Orange as ever more South and who out market really move of That primarily trying marketplace XXX% are in the for the are purposes are or Sacramento. we have to that as priced Area to in us not big in in then that Bay Valley area, tax small influx again third for California seen buyers our good as seen but

We least we're and at haven't start bought there bit have have but are so companies to some Reno California we looked we to that as there have there buyers, market be in little market some does started particular considering getting anything well yet California Rhino a relocated as not because appear Tesla or but appears ex-pats, the there yet. we it's are haven't some - and something that there, in

Alex Barron

within Okay, as of it the Inland where going the keep are to the sense there, you A type be which are of like to can to your Empire mentioned company kind affordable, more is what I mentioned of you and where as sweet going the the curve, be, us market if going you you're moving pertains Ontario or to of it going? A kind in great Inland of towards and markets moving Are give you a trend think you spot? you Empire, price stay you out kind are going where guys moving and as to those is deeper down further of

Larry Webb

the and along Empire is Well, this the on right Bedford we XXX% under we're are in further we that's that's so plan where our master not home now that's point. side X,XXX focus quarter at where west East have looking we're Inland called fifteen where Corona, working of land looking our in control, the

Alex Barron

that plan, going be to or you builders it's are selling planning other you master the to across - all And on

Larry Webb

joint as in other builders to we're - it's No, a well at selling and venture south. we are

The you phase, for to up beyond three and fall. be that lots first but there's out in and optimistic opening the early have another that let go are yourself. of will next very summer we'd and be it community three, we programs you're that you tour happy see those to housing there's one to about We'll X,XXX time

Alex Barron

on Thanks that. pick luck. up Okay, good and you we'll

Operator

time. I for Thank Instructions] this back are any There remarks. Webb no you. over further to like turn call closing at Mr. questions [Operator to the would

Larry Webb

you. Thank

a tell, confident this wise But with for grow see recognize much know this we and the is that we are housing consistent we in and our and just one towards backordered quarter-to-quarter We that. the see transition forward that strategically As beginning correct We of results we're is is to more affordable become process to I way very hope to company to stop begin our that starting, the no you we'll forever. year more move that that and 'XX. hope grow way. as net primarily can

in you. you you the also JP show to We who new Morgan think what can me, - we're we'd wait many at want to and on as we so Tuesday, also that show excited programs what we conference any California to, we welcome want would ourselves people it we're we're ones because and May that be one on by to really of welcome that we doing. you with note might have and differentiate you we're XX is I what what come accomplishing tour again look We're any call doing. about to hardly creating we housing Southern like out we'll of you

much. So thank you so

Operator

you. Thank This concludes today's teleconference.

disconnect at your lines you wonderful may participation You a time. day. and this for have your Thank

New Home (NWHM) 3 May 182018 Q1 Earnings call transcript