NWHM - Earnings call transcript Q4 2019

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Operator

Greetings. Welcome to The New Home Company Fourth Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded.

the to turn Mackintosh, host, now Relations. Investor will conference your over Drew I Mr. begin. may you Mackintosh,

Drew Mackintosh

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

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

measures in call. of the The with SEC. New this non-GAAP and its be non-GAAP website Reconciliations in with to may prepared filings most the financial be conference measures in measures accessed through Additionally, these comparable accordance financial can discussed GAAP Home Company's

Chief President the Officer; Webb, Hosting Miller, Chairman; John and Executive Larry Stephens, call today Financial is and Leonard Chief Officer. Executive

turn will I Larry. now that, call the to over With

Larry Webb

the joining to good today. call afternoon and Drew, on everyone Thanks, us

and of New Discuss year fourth the on Home Company. quarter the current future results full The we As our color go homebuilding trends market some over XXXX. provide for and

and company, XXXX curtailments. of The cost cash capped which generation flow a our year fourth marked by quarter strong was for retrenchment of

We the our further more our a conversion, goal product segment combination operations of sales in structure, the from land through of to business. backlog leverage we cash reinvestment of prudent streamlining the offerings As $XX strides affordable and million accelerated moving generated cost of flow and while towards market. our in our ratios, quarter lowering all our strategic fourth made

our the end considerable our from also debt-to-capital a flow of of the company. million, and given lowered as cash a the sum point from improvement brought first reduction operations ratio XXXX. year to XXXX size a our XXX It $XXX quarter XX.X%, This total compared basis point of to basis X,XXX to the net for

we SG&A our and for blow and front, cost Thanks employ expenses the our to more personnel efforts to expense efficient reduce kept XX% On fourth marketing quarter. the methods. advertising

ratio excluding SG&A lower improving we solid had foundation severance as at relative our on has structure year Our in points company than in our a begin much full the was basis leverage we XX.X%, XXXX. in The it charges XXXX cost put a to reducing XXX XXXX. our and success came XXXX for more

trend we open a more the new entered also communities that We of prices of XXXX beyond downward should year-over-year. XX% ones. fourth as our into homebuilder. the close decline priced quarter legacy selling into company Average price rapidly and diverse itself more and transforming out more in affordably A continue XXXX higher and a as priced affordably year

parts communities base areas of loan market. away coastal the company limits. state community of next openings will more limits pricing inland These fact, as conforming very well priced our be FHA months California will and In below XX XX into below our and strong the as shift XX next over the the have the XX Phoenix of we'll from

our then half by view our in XXXX quarters Based jump and order sales closer XXXX. we'll believe of to just markets and will price projections, closings this our to at the Based we product higher in communities, XXXX better current out. rolled upon we've long-term positioning three XX% in We our entry lead more moved activity trends time. on witnessed closings we've dynamics under deliveries, the profit to already affordable of housing level the over margins of

outlook both company is our levels is environment. industry, then Supplementing low consumer the of and the of fundamental interest encouraging of backdrop historical favor highs, home inventory, and new encouraging continued existing by characterized near rate our which confidence

as in the the Association true California. is especially inventory home levels is indicated tracking to hit Last macro the our to soon. typically tailwinds REALORS stock National will These momentum they resolved the the our sense of a both replenish lowest and of need not urgency that in nation spring and have behalf existing buyers The figure great give for month, enter well XXXX. created began since us housing real of industry. we home be of anytime on This season selling

holds. about We industry what from I'm excited specific have a and both an be lot for optimistic to and standpoint future the company

extremely note gone to recent leadership our smoothly. transition like I'd Additionally, that has

I'd that, color over operations turn like to provide more Leonard, call who our With to will on quarter. this the

Leonard Miller

Thanks the everyone good call. to Larry, afternoon on and

to and the goals putting quarter, us fourth continue repositioning generation, of in a product were one year we ago. execute today flow on we better in mentioned, our Larry than much cash As cost position containment

converting and turning members goals. focus communities more through headcount excellent team these meant portfolio. front, operational to our and selling tough respect on did our being This the sales aggressive land meet job slower to decisions cash with to an making Our more their adjusting

at evidenced these efforts performance as of gross weaker came expense In margin in some cases, profitability our XXXX. by the

higher that improved. gross structurally, we as However, to a to our growth start selectively we number prices January. now margins communities move strategically, demand improvements price in of make we across and to continue our financially, through legacy XXXX order to are prices that month we We've can raised assets start and better believe place the and for a year-over-year of increased has where see

months purchasing year. better year-over-year our today A to spring. market labor improvements, great home at order start it than last land most in material with input finished experienced have of the higher for are considerably and to the costs, In start the year. terms feels solid five head with to dynamics, that concur industry Larry We markets, overall of a I was traffic on flattened. ahead of consecutive a the costs buyers respect the signed continue while and home looking With are move get XXXX

affordable of In market the theme all color, more markets. local at consistent order terms of stronger activity been in points a has our price

of improvement points recently, Northern However, and but at of across the market. areas signs see life and fourth some has expense California came at we The did during quarter. price it shown the of coastal higher stabilization Southern pricing the

that to the will of impacted markets decline be affordability, by foreign in the continue these the believe case segments. We of buyer and Southern California,

the Phoenix of be inland of have the trends are state continues price led order a one in reduction moderate rates demand stable higher much were to The and in increases. incentive to parts more in five new markets contributor within finally communities the start this base with FHA and coming a be online best housing loan country material results with year, to limits. the will prices seven to our activity

well at competition. emphasis over that a our excited of from slated that each We quarters. are as unique compelling sets ourselves these the We continued have lower about to as with markets other our desirable edge open affordable locations found our coming company believe the a apart for points we on communities price designs community in rollouts and

like to more on I'd turn John for this financial our detail results for to Now, over quarter. it

John Stephens

Leonard, and you, good afternoon. Thank

as XXXX year quarter, the period. For a loss pretax ago a loss generated million the $X $XX.X fourth we pretax compared million to in

impairment quarter. impairment charge million pretax inventory Southern venture quarter $X.X the diluted compared Phoenix, included loss, $X.XX impairments, to or related charge we consist in a million land share net $XX.X community in in condominium generated $X.XX for related the per $X.X year a these a a loss million loss development $X California. quarter prior share current a Including to The net after-tax luxury of one of diluted to million or joint and per fourth after-tax

benefit of for tax to the deliveries. addition, the $X.X federal fourth XXXX tax quarter net the included In related XXXX extension energy million and XXXX credit a

quarter million, impairments, $X.XX $X.X was XXXX for per or net diluted Excluding income share. adjusted fourth the

Our the experienced our to sold the to the coming deliveries during demand close for quarter $XXX ability spec X% million at $XX and high home quarterly in guidance homes exceeded of by during and fourth sell sales increase homes. our XX% quarter. sales the more due our revenue QX quarter for the or end million of

selling deliveries price our Inland X% deliveries the was up affordable year-over-year selling average California. coming in with was delivery decrease products, The and operations per XX% down were more while price consistent $XXX,XXX in to Empire our our our including Southern from in Sacramento the The more of transition continued quarter. average for at

sales home $XXX,XXX. $XX our homes spec price first delivery, homes million first Based for quarter available revenue $XX quarter to estimating selling for on and million we first of approximately be the are quarter and in average and the between backlog

for XX% sell of conversion of year rate we specs Our were that completed the a was the higher quarter to XX% rate result ago population The that the to a backlog fourth of improvement backlog conversion our period. during in quarter able as and quarter was compared deliver.

to quarter, XX% rate will range. estimate the For the conversion mid we our return backlog first

rate our for year-over-year by from increase improvement to stronger due year, prior largely monthly California. orders up driven homebuyer XXX% and in Our XXXX The sales and order XXXX were net quarter third sequential fourth the XX% sequentially absorption quarter the quarter. over fourth new in XX% the demand was up an

of $XXX in order from As to an of of down stood XXXX was a to our dollar decline quarter, XX% quarter, fourth XX% backlog of result backlog of third as lower rates the at end prior backlog the of beginning quarter year. The from end and the start backlog backlog value homes million our in due quarter fourth stronger fourth the year, units the conversion number at was improvement but activity. higher the the the

$X.X fourth included impairments a incentives year The X.X% gross fourth margin quarter fourth originally in million the to quarter one XXXX for $XX had condominium quarter more in the was the related period. a while versus in absorption slower impairment million impairments. inventory Scottsdale prior X.X% XXXX luxury anticipated, that included XXXX charge, and than Our community inventory including required

costs. gross period. The reduction sales our incentives the margin and in to home was point prior higher The basis from versus the interest margins XX.X% XXX gross impairments impairments, before year related for due primarily sell Excluding relative XX.X% guidance in was largely California higher lower spec community needed homes. our to was Southern price shift at homes gross delivering margins in were higher a mix or completed more incentives in to nearly one legacy to quarterly quarter

gross impairments Excluding from the cost sales was of the XXXX year XX.X% sales, XX.X% to fourth as home interesting quarter in margin compared our period. and for ago

sales are XXXX of home first we XX.X% between gross projecting quarter, For XX.X%. margin and the

flat X.X% despite was percentage Our SG&A a than XXX revenue in revenue, decrease was sales our for of quarterly X% the quarter the home as guidance. prior and lower sales with year rate points home fourth approximately basis a

for approximately business during after prior XXXX Our due overall and lower less period was year costs the quarter expense the that compared than $XXX,XXX about year the fee less $XXX,XXX prior personnel quarter to G&A the to G&A was largely as in expenses, fourth to the four period. allocating

projecting deliveries. The SG&A range. XX% the first we For and are rate seasonality low SG&A be first rate our to revenues timing XXXX to lower due the of anticipated quarter higher result quarter, QX of anticipated is in the

typical, as we increase drop through of our sequentially revenues. the rate move to balance and the is year our As SG&A expect we

in development joint largely $X.X in with impairment the in joint resulted of quarter loss adoption write-off share allocated of us and and of revenue million to venture Corona. ventures certain loss Southern the marketing $X.X recognition for selling capitalized to standard ventures. due pretax California balance our the joint at the expenses The at of joint the connection Our new venture the land homebuilding a two fourth million of at activity included XXXX was accounting

the are first break joint anticipating we to our about loss quarter, even XXXX For ventures. a from slight a

to less period. $XX in for building fee communities. was fee revenue $XX our quarter The million the revenue year million as construction to ago building fee due activity compared fourth Irvine at for Our the lower the quarter primarily was

are quarter, building between first million. fee we and million estimating of XXXX $XX $XX the For revenue

XXXX primarily XX.X% Our to higher spec federal quarter rate year effective energy fourth quarter for in was period. ago during XX.X% credits extension The the benefit was during the the a December the XXXX XXXX tax of XXXX. fourth compared rate for to for benefit due the closed homes a benefited and

quarter. an discreet effective tax the We of estimate items fourth income year XX up slightly from for approximately active XX% We first rate ended XXXX with the communities including the quarter.

community one of Phoenix. first to be community in our XXXX expect quarter plan count seven to a approximately sequential year, new for up communities, open which are on And XX full We the located ending basis. we

we year-end flat from community However, net expect ended relatively XXXX. remain a where basis count on our to we

we outstanding under facility a the and quarter, with the of cash the strong $XX operating million paying after As year cash ended the notes we balance in generated our million result our XXXX. flow $X of that repurchasing due revolving credit down senior during

reduced we debt the XXXX, fourth balance $XX year. for ended during our million. full million year million total spent $XX with by million we land full approximately a and the the of For $XX the year $XXX We on quarter and debt

XXXX $XXX spend million. to land $XXX For million budgeting of we are a between

to turn now the will I call back for concluding his Larry remarks.

Larry Webb

take our to cost strides greater great of the and fourth made improve that balance quarter our demand size healthy sheet, advantage reposition our to in we company right trends structure, conclusion, more of retrenchment In John. efforts the a benefits come. XXXX our and years in price to witnessed the look at our in year company, forward we've was of points Thanks, to for we affordable markets. reaping these

I'd team needed we where members strategic to their a be to all get and work our standpoint. of in to Finally, financial XXXX, hard us for like from thank

a Your confidence of of Home and great future ability number fronts to industry me landscape Company. the gives New the changing The continually of adjust execute to in ever our

proud recent our A Builder also Professional XXXX I'm entire great honor of recognition team. as Builder magazine's Year. the our for

your now That happy and concludes questions. be remarks our to prepared we'll take

Operator

from will Alan & Zelman Our question be Please At with Associates. proceed Ratner, instructions] your this first question. a we is [Operator question-answer-session. time, conducting

Alan Ratner

this stronger generation, ago. into quarter off congrats you heading in of the reduction bit obviously and first obviously But cash progress point with debt a pull So, little year and to push know, the there between it much I of on focus XXXX I time that agree is trying margin a certainly the then drive higher. starting on

as able My was curious moving to pieces you first targeted legacy the the at drag be there gross on you you've on kind move question, of those of did had averages? look I through some the and frame company verses, the point, community reported entry margin, level the recent the how the that happening, of totally us, understand more more that projects, try price for margins if current to that's openings might those kind

Leonard Miller

we've the for the Thanks new points, those and margin good price Hey, really well I to say to opened targeting talk average margin absorption All standpoint. and both on up Alan, is it's would gross what lower Leonard. question the the above you. the communities gross company's that that and rate, is

Specifically to points basis about to higher. XXX is points XXX your basis question

Alan Ratner

kind as little that bit. of starting that, bit foreign a talk the was to right rhetoric lot of I commentary quite tone improved of little signals anecdotal a buyer bit little think now. question, Second Definitely, We a of out has were mix data come some perhaps the Chinese trade back coming of California bit. starting down to a a there's even hear the

On going that spring. people a concerns potential coronavirus of over hearing some having on on talking a even hand, impact the now about the I a the lot there's know other

into projects, was you're could market curious moving but just talk from know piece seeing. and little climates that away give foreign I buyers in what insight you those you a coastal in know what like? bit So, any about current kind the I you're a the I us of small of general, if can the

Larry Webb

on qualified exit we Alan, question in this that upper can particularly, is couple the person you'd I strategic you not a like and plan Orange made County a years to market answer end tell interesting a the of It's only anecdotally, now. because I anticipated the to a ago. is Larry. ask move of right feel I I'm who's coronavirus

the in South are And landholders with I've majority with. so never contact seeing pretty in California. they've of large uptick been Asian an Asian that basis, in in to as Orange buyer. today very we our -- was by Southern anecdotal influenced County the on close But sit here the And an communities the that said they're are three all market begin

haven't Chinese an we It And a they've least from us seen outside the any impact on weren't negative significantly selling or impact or to at in buyer because so far very coronavirus. But in stories has the just, any other of really heard at plans seen any any any at comments haven't all builder I anyways. developers any master hit point. we this

Operator

your Asset with is Sean next Our Management. Symphony question question. Monaghan, from proceed Please

Sean Monaghan

what any about of give, you if potential the and kind lot the of half. seen think refinancing you've a from a some down could was road? home building debt I month on update of Obviously, guys refinancing you levels last and wondering just your space guys

Leonard Miller

it's go eye that is at that. evaluate and we of yield I to very seen those, currently, many again, strong homebuilders obviously, more continue price here our mean, has some point, to sort Yes, years also to maturity. to just look on. evaluate to we there's sort market what markets trade beginning in last will that year. we Obviously, relative but of at bond positive. been where, the something have the late months. bond got But the little gone and couple something this we'll considerations since continue We've the to trading that up now till very is two of And high which than we're into of over a what so that of do a very, will the our We've lot have left refinance been

Larry Webb

one we we company here the we have year, than focused I margins. as that our be position so And great done Larry, to the say really Sean, under right more when and ago, on Leonard it to our it's a our or able primary advantage the and goal in was were keep this goal than opportunity year it's of primarily really our difficult John their so sit team But going less that and we're that. getting XX% job today. than and But financial we is year. to improving one leverage in were much lower a we're of leverage to today improving to financially XX% today, safe are take occurs, our think -- maintaining position at a

Operator

now call would the further And are at pass for over to questions no closing Webb to There remarks. I time. this like Larry back

Larry Webb

year lot. goals not pretty costs, easy. been reducing some Big picture last materials We the building Thanks G&A. has well set both a specific of as as

We to the to our We lower in also our quality affordable pivot we we a significantly. never were compromise wanted wanted continue along more the or on housing middle our homes, wanted towards that. our And leverage service treat customer how to we the of way, of and staff.

those gone now into. next through foundation do. for the the laid darn we are four we've been basically that two And have areas. like to over To year look We all the successful we for to years cash and brought extra we be we and the last everything the take that in -- opportunities really pretty feel company improving

Leonard look Along us John it in XX appreciate continuing both to the we ago. company and with bond confidence and doubt, have Thank was that equity being you. done forward is to Leonard And CEO, the for holders a months and improve. done the would shape everything fantastic without we better say we than their job significantly I a way transitioned into have the and

Operator

today's concludes conference. This

You at Thank this may participation. your time. disconnect your you for lines

New Home (NWHM) 14 Feb 202019 Q4 Earnings call transcript