NWHM - Earnings call transcript Q1 2021

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Operator

Greetings, and welcome to The New Home Company's First Quarter 2021 Results Conference Call. [Operator Instructions] It's now my pleasure to introduce your host, Drew Mackintosh, with Mackintosh Investor Relations. Thank you.

You may begin.

Drew Mackintosh

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

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

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

Lawrence Webb

a Home orders quarter a first fronts we our significant to ongoing great start pace. the today. driven quarter. of our The stay joining Company, demand per imbalance on markets, year-over-year, to as New call a is company for the increased morning reached have in during by Net XXXX off absorption community continue everyone excellent quarter supply to in was communities. by Drew thanks The of made number sales to the new monthly the positioning we well record progress as we as good X.X for was XXX% our improvement us and XXX% and Thanks, in market on for the

Our sales ended been for a meter the manage a effort the strategic our to with not decision our sales own for where value for could million, quarter, it have in also quarter to raise higher cost and potential XXX of our backlog, even We prices. an pace company. backlog dollar better increases record capture

construction single would meet is current just This it three needed to home of years rate the XXXX country's to the housing of is or which of means our closings great on starts, the quarter, deliveries over that, million X.X [ph] anticipated take our for already with based us our approximately strength new reach together demand. to from to market. family According equilibrium. from of country million market either homes in with as first demographics closed Mac, financial the expectations a other undergoing driving a to for is XX% supply combined short visibility in Taken future now backlog, the sales revenue into The crisis real of due forces the we X.X run Freddie and buyer of US deficit and operate year faces housing recent family have our us the single gives years efforts. this what position millennials emergence from following analysis with housing the allows of

positive time. be we the for backdrop home Given fundamental will new these construction some factors, believe for

our the perspective. Homes, of the the we acquisition efforts progress and year, We continue with to on Epic make announced entry geographic diversify a company point Earlier from during our to the both Denver a our unique into quarter, exhibits in market many of qualities growth life, vibrant Denver a with steady rising builder a we market, the excellent for and in look strong and presence of levels. home population, young new income quality innovative the an a well-established job market. including in price

are team The of group, share we Company emphasis customer Presley the Home her bringing same operating into We Homes' as on construction, they Epic innovative and New including Founder excited Chris philosophies satisfaction. quality design, have, and an many about

home Home XX.X%. a to be pace into translated the absorption points and we basis These several times improvement exciting In significant received years year-over-year as terms opened to in the home and desire improvements gross the has XXX we've more sales our margin profile, been a communities. customers' home to we markets. our new, have from their the home we Company balance of gross affordably between our and the advantage positioned right an to margin positive on market is And for are we in passion of priced new have strategic our With position, it achieved detail repositioning that unique operational last our builder quarter And reap points respective quarters this our continue award-winning our to performance our decision to at After over our I'd price. price Leonard, today. fundamental like of communities design provide New down for rewards The spectrum over the attainable company, to move well new believe more to quarter. that, turn extremely this well to found exists take drivers who will

Leonard Miller

I and extremely improvements the teams Thanks, leading our in Larry significant backlog. quarter, pleased the to our substantial executed increase profitability am and our first good in way to a with morning, everyone.

due geographies. supply in urgency to our looking price lack Larry As and for sense when a elevated is creating continue available of demand to seeing even both we existing mentioned, at of our putting all builders home the are continue have our to an communities demand, a position home raise between gap across and This grow great and urgency new and a trends markets. in Buyers and supply margins. of wider to other us points prices

many own hot their can starts. present with it stretch ahead more raw them. of price this we labor creating an selling of also problems a stretched to an its While indicative to are in position Trade red suppliers. from a challenges real in costs. increases implementing to like they getting supply lag chain markets, upwardly customers own trending These that The and together materials good is enviable operational sales standpoint. all Suppliers between and taken in when lead are homes, expensive are an can market of material is and an building being stay comes effort for have and are challenges market to

The matching sales. XXX sales. imbalance great their trade starts first homes has starting experience increases, each with releases occurred while sold despite work price partners limiting we multiple in Company is our Home implementing operators in who have an through the meet of sales the challenge and In New The Fortunately seasoned XXX. while have with effort issues. to our Currently, quarter our these markets relationships to biggest

We we to of and back have close starts report equilibrium are to I'm a sales to continued on year-to-date an work to hard today. that between as happy the gap and basis

areas all environment color, good and build. In the terms sales is, market it's to overstate which in we the hard of how of

of reports continue well locations us, California exodus media to despite the from an perform Our for state.

few [indiscernible] mentioned more communities backlog Arizona, well now, seen state, are the the including geographic priced communities position we has a of light migration order the overall have operational we of Sacramento we to higher for our Emperor power, are pricing continued this in our In from the seeing footprint like that while profit probably as for for the full across all as the raised Central revenue guidance the and believe of part our the really this home encouraged And areas have and parts in Inland how strength months Valley. positively been year. and the trend active of though a into and improvements to we And a coastal year strong have the end are presence we benefits a of earlier areas gross the locations of are substantial all and have our in both sales performing. inland buyers a are I turn challenges been market, We XXXX. in Empire, southern responded momentum we both our most the margin a in company's in market great the markets, at of pronounced only enjoying significant In market. northern quarter, by

our Looking achieve ahead, we XXXX, projections. place believe on double-digit we have for the internal based goal pieces on current our equity return in to of

our may is have market general and rates, that supply are factors impact including on from economic to to expect sales perspective. we goal, of of active how control an and and deliver of trending mortgage number the achieve our a the by a the own chain next disruptions, trajectory potential cost all we this ability currently are inflation, we year are environment, and there or encouraged communities the both performing margin where lots While

Now outlook our remainder our to John for will the over the quarter update detail on performance it I'd like on who financial turn more give provide and to an of year. this

John Stephens

good and everyone to on Leonard call. morning you, Thank the

impairment in joint of quarter, million, incurred an with For XXXX $X year included million quarter, the charges. In pre-tax transaction generated first $XX.X the the abandonment of we connection loss, $X in costs pre-tax prior million acquisition which Homes. generated Epic first which included approximately XX.X of and venture million we income

deferred for charges $X we million first loss acquisition to period. loss period, per per related of Adjusted compared million Excluding an prior costs an million an in to XXXX, of $X.XX income in or share deferred the asset income pre-tax a net impairment the per loss charges in the adjusted expense re-measurement adjusted of share, to the prior benefit. Net the X.X costs X.X Epic quarter of the $X.X year. of and prior diluted asset year to income generated Homes XXXX year $X.XX in or a diluted for was net compared before and or XXXX before the net and X.X million re-measurement venture million a $X.X was XXXX transaction pre-tax abandonment as per XXXX and diluted $X.XX tax share diluted million share acquisition acquisition joint for adjusted tax the first quarter the quarter for of compared $X.XX

and by $XXX price quarter. million to XX% million XXXX increase and be be to Homes in the reflect $XXX updated and second between revenue We during quarter. of the approximately year-over-year Epic decrease the selling which revenue as price, the for we XX quarter period. compared in to down was million a in attributable price The XX% offset year and sales first point, slight was million selling to diversify average XX was to substantially sales in continue second the estimate $XXX,XXX quarter as move average to home decrease impact deliveries prior the home our our guidance for Our

the year selling $XXX For million home approximately to revenue $XXX,XXX. $XXX we million estimate full of approximately an XXXX, and sales of average price

represented interest margin The of of demonstrated during Epic XXXX we reduction costs fourth Larry in included accounting substantial and our one points also a as basis was gross in our the to the reduction move progress deliveries margins. in and sequentially of Sacramento. prices, XX delivered As meaningfully increase gross higher a of XXX mentioned, The improvement which the margins by sales, ago XX.X% by quarter as the in adjustments point our up of first XXX from purchase homes driven QX home raise compared mix related the acquisition quarter, to a point first XXXX community made Homes, year-over-year ability to year XXX $XXX,XXX were point including basis with the quarter. cost shift capitalized more we basis margins up XX.X% quarter, to a XXXX included basis at

impact Homes, be for points and full guidance our second the XXXX accounting both and was the interest the margins which and gross up from basis Including previous home we first adjustments Epic the for year. XX.X% cost sales as purchase to XX.X%, XXXX from year between XX XX.X% year. prior estimate for to our our Excluding quarter is sales, XX compared to margin adjusted XX.X% full quarter gross the in of between

premium the SG&A was quarter versus largely first The period. as Our approximately of higher revenues $X transaction in we XX.X% result during the Homes, the related directly expensed G&A to to primarily acquisition Epic to that related tail percentage ago home for was rate, a of rate the consisted sale costs SG&A closed million previously insurance of of in the quarter. XX.X% homes which a year XXXX in

In fee costs $XXX,XXX. addition, of decreased sales G&A building expenses allocated to

XX.X% estimate For quarter, costs. our full And SG&A to rate the XXXX Epic and we estimate XX.X% including SG&A between second transaction between to be rate we XX.X%, and our for XXXX, be Homes' year the the XX.X%.

a year quarter was and from year quarter Colorado costs, rate for XX ended which to XX.X%, full communities, XX first guidance. Excluding be the XX.X% basis with actual acquisition to SG&A We which compared adjusted our full prior increase point represents and the between communities. improvement our transaction a estimate to X% previous we active three XX the included the

the expect We communities. at we anticipate will new active out During we we the of end estimate that and opening which second of XX communities XX end year the communities, communities seven quarter, approximately three QX. result in will active with closing

profits fee full For between in million between the $X $X year revenue building XX XXXX for We be increasing million fee this our million and million, XX XXXX. anticipate second and and XXXX. in quarter, we to our estimate revenue the segment of revenues and estimate

million delivered control from any homes homes the and we joint lots final home venture own or quarter, the joint any through our no active longer last During venture. or

during income resulted reserve was related joint ventures the of million from $XXX,XXX land quarter a satisfying sale that the condition occurred XXXX prior primarily of The compared a Our hold related in first to to release the from JV loss income quarter in a XXXX first back XXXX. completion X.X year. to

pre-tax items, the rate of tax tax expected impacted high for rate as operations. including a from a income relatively result was our tax state of our state the stemming first Our at income the effective XX% by the lower deferred nominal assets, quarter to XXXX addition Colorado discrete of future certain was that from remeasurement amount unusually approximately

balance between revenue connection land full Homes million the first based effective flow approximately are operating in of $XX sheet, acquired by to Turn state. year rate estimated development, we For the contributions quarter. We an under X.XX%. in for $XXX blended $XX XX and federal including a call with debt XXXX tax current no our million effective credit at our spending for during yield XXX XXX XX% XXXX, spent land XX% million statutory generated revolving and facility. the rate We acquisition concluding additional development an in issued and XXXX. estimating the on we million the cash remarks. and land of turn the full and borrowings million cash notes $XXX back and million the to into on X.X now We land and and cash liquidity equivalents, quarter million outstanding anticipate had senior XX of with ended in Epic year Larry on of his land million million I'll the current of

Lawrence Webb

market. factors change our is the interest we the business may in while that believe will New to two demand long other industry movement And on rate driving term. entrants supply of not from The the the and housing John. benefit Thanks, impact of housing the they new new lack Home Company These and are upward to short trajectory over into emergence heights. factors our continues term, the

the from offerings significant has appealing spent buyer. XXXX. we've goal last a further our to few few digit our new We millennial and and of more path the years role put this equity financial more a making a performance, year improvements affordable last and benefit we to to next, market, We returns the played made company operational believe can on age repositioning to in home which on us such in quarters. strategic This have with our shift profitability make should continue double in the the to improvements

is have Well, on is received future and that the favorable our lot current often industry feel believe are really these positioning, goals reach. tailwind calls bright. today, stated well the the I we now. market I significant these our future Given within positioning

a thank our Finally, all I'd team and us to of builder our into company getting much has like we to members a more operations wholly-owned you, of with points. today. Thanks in markets diversified for where number price are evolved

in like I That our than and position questions. we'd remarks. of other efforts. for up a it am any to prepared history your open And concludes really our We better much are time appreciative in company's now

Operator

Zelman of question first Ratner line proceed your comes [Operator from Associates. Instructions] Please question. Alan Our with with &

Alan Ratner

strong to morning. on quarter good glad well. you're the guys, Hey, all hear and Congrats doing

I'd love a quarter. in the to question, Epic more in little acquisition on dig first bit So the

looked more to first, so our at market. sure first why Southern wanted off, John, was deals we and I of a to three potential Colorado, more A the West. considering other curious last the lower lot land couple of perhaps strong, of Denver number all and sales, Denver reach We company Arizona, be Larry. - grow obviously, markets make was and taken been chose every - western this you the the imagine were markets is the and probably of time, market first we've of Just experience I we leverage, other Denver expansion Epic Epic? from things years. felt existing at wanted we'd so the why Epic in having much why Lawrence And with Leonard that and wanted and the have thought on versus are financially why that share love your that all market fit. trying we we We've for stronger a because and local more looked chose position Webb market in now. process us, better specifically the alternative first to right California backlog, And into Alan, acquiring a the to at to hear good, demographics we was strong

Chris number large of lot marketplace, they worked building, were we at team, were industry they And and builders a connections that the homes Epic, primarily there. all having within her and and after a they the we small private Denver have of a felt a even because We had were upside. though Presley the reputation getting looking her that in they of builder. chose results terrific the of kind

turn and be it focus to on and felt over precluding in Leonard, financially in we land I Before we're the can be well would we point we your our there, Denver. own was second markets as as markets

have have think be. to got stronger. so expand all worlds. And A our Financially, we Denver's great best and we an place buy and markets. still we in a ability to of the the we're player existing We

Leonard Miller

everything betting I covered in Chris it's aligns with Home and all Yeah, her wonderful people. aligns Her most and and focuses focuses fundamentals. the operator very on that design, I with so Company most, about has starts It She a New think, Larry, say, The right. the always But really well. you brand customer Denver. market quality the reputation on well on

I think neighborhoods has the in fits fourth that next the She for of well the masterplans. part XX open company. the to here in is has are open size it of currently are other scheduled very days. the performing three that the well She well-known transaction

So then that that attractive. weren't be we would where a was taking of entitlement position really development And going risk. we the or into thought

You $XXX over had company. million was that of performing a to and the creative that community backlog know, it a transaction we company bought was so well,

just for So on aligned us. it all fronts

Alan Ratner

thoughts on I and both of appreciate that. Great. your insight

time, a so the great So deal seems it right like congrats. at

here a kind catch also was pace quarter, thus but little April? lagging or start your and April. sales Was limiting you it bit of being Second the accelerating that to production caught ask actually into you've pace up love the the fact through during seen aggressive and far more intentionally question, have I'd the let pace function sales comments the kind your that up guys you far of about on so of first kind of a start to the

Leonard Miller

months, how equilibrium trade a to last I in us of would that homes month, And day our we partners perfect the neighborhood. say is end Yeah, it tried the and down over labor different to it to sell that probably start up something lot somewhere a question. good four At don't for anything just reasons. really, to is do we've stretched. is to four four generally homes, the is slow we could six fail. want homes, sales But set of close for

and We supply. have so absorption. really market was our trade demand in and - long with front so And just that out were really, of relationships of targeting we that strong been a the I've never is term far market type where is seen partners so really

So, the positive the of and in just that is we could did at of sales are trending. our what day, in the starts the really grew first or we end everything basically Xx do quarter, that April our through trend

where feel we're we're in good equilibrium today a in so. So we position

Alan Ratner

that Xx your the little different have start actually Leonard, sales trying to numbers a implication. half? just or out obviously figure it's in bit in the Does comment. mean just I'm clarify that the cut are doubled of because a what

Leonard Miller

off Yeah, intentional. and backed sales have that's

Alan Ratner

Got it.

Leonard Miller

weeks I look have last it released mistake numbers unsold of than eight the for be been to homes a company. on would So, rate, the of neighborhoods, at the give example, over you less XX running across you and because focus some active absorption six, think XX when having to just we homes, we've

very continue sure intentional, up. grow gross to have we margins starts cost the our that to increases, want it's at same we all time So capture make ramped

a it's of combination So both.

John Stephens

wouldn't to point to pace of sales absorption we that just is would to see and obviously, rate really balance X.X quick I how calculate add for our through Alan, it that, like and year. the that Yeah, was expect QX

we Just for equilibrium in said, what's sort forward it's we sure like just available Leonard sale. making and have stay now deep and really pretty backlog going a of

Alan Ratner

range So realistic, strong assuming with three is. more something in be it the, as demands stays like,

John Stephens

sort a backlog that's at today. where kind good of think we're I based assumption, of the and on is where Yeah,

Alan Ratner

lot. a Good Thanks All luck. perfect. Okay, right, guys.

Leonard Miller

welcome. are You

Operator

from with Our question. go ahead a Please Center. Housing with Barron next Research question Alex comes

Alex Barron

positive. things and see Hey, good job are Great morning. guys, good to turning

Lawrence Webb

you. Thank

Alex Barron

ask wanted and in Colorado. the about Denver to I acquisition

the you XXX,XXX here ASP so like and And ASP in kind is guide in second it this the First were us towards deliveries XXX, but seems somewhere is orders it ASP, of to year? of backlog what getting it else? deliveries all, for use I'm for can or over all, of low of in the the Denver an on

John Stephens

company? Are you about you talking about whole talking for just the Denver or are

Alex Barron

whole company acquired just Homes. you The Epic

Leonard Miller

Just Denver.

John Stephens

well, really Yeah, see you reason I we during The the was our three why - than delivered, question, products in the I ASP backlog the Aurora were we think, what other homes the out lower reason good more of believe them Alex. the delivery is Anthem affordable called that from I and quarter think have Broomfield. was in in and one at [indiscernible] four

new That's nice open, of or in million exclusive there of really of three XXX,XXX QX, to We're we to you a XXX the the a from Plum. options, point. then little that And them in say, excited then higher that So in open would reservoir. lots. $X that's mid can up the have the, called to opportunity. so really It's also communities community It's two very from options, there Alex, bit. to anywhere end, sort you were price one add [indiscernible], sort range. on Wild a of a next infield neighborhood. planning may we're about it XX Then And go from, in million-dollar would a up I point. and fours it location when of go That's sort Columbine, the price add say I

Alex Barron

great. Okay,

two. those take an So of I average I'll guess

that? in that Now, of quarter for affect is longer impact, something purchase than margins or that or will what terms accounting two a

John Stephens

adjustment were to quarters we the process it did impact up is next in we further more what more will be the in first we're a wrote of purchase obviously because on the in along have delivering impact of backlog based that the an lots for going or that purchased but the six production next the all think I a an homes Yeah, couple price, little that kind quarters it couple then that. months we Obviously, the after an for so. and of there's normalizes

Alex Barron

excluding like lower high in or that to understand to year. the And are seems the rest your be guidance trying seem to but quarter going that just margins imply driving the point the what's impact, Okay. it mid-XX% I'm this that? range would of were margins

John Stephens

issue. quarter think. for us, mix a I XX for really it's revenue Yeah, light A million, QX

I balance As XXX the and that in sort XXX you range. think about for year, move the through the talking QX you of to of move year, through we're as

some our So that's we of Sacramento - that be more out homes nearly closed division, higher closing delivered priced out. will

thing continue improve there, for as we on margins the we pulling previously. in it's pricing their a than issue - before So are really then I'd other are to basis, kind a bit lower acquisition, Denver you've other the have north a than of our where little had because division number. And divisions what would capital XX% revenue to at insurance. GAAP Denver a lower of accounting, margins mix will had better say cost on and exclude cost that XX XX% that operations, our and that capital one the look and We forward, moving she of purchase be of are and there, costs the and inventory. interest a that that, And our if fact little mid margins the and that like of to backlog were the XX% capitalized plus believe they higher obviously,

impact as $XXX of we're for an have little going to did excited the margins that. million again, Colorado forward, really earnings, but a well about bit top and on add it's our line So, backlog as moving line of bottom volume,

Alex Barron

guess those to I some I along comment you anything Okay. ask what call, guys type times last have experienced, delivery I you and my one, due supply would And lines? disruptions chain can of could if longer

Leonard Miller

up pressures XX I It some in by market we've while to Leonard. is our Good cases What morning. This divisions, you California partners, again, market. worked there, is years. is Alex. with really would in Southern our tell Sure, California there's Northern XX trade to and

an as our the - lost four increase there, we've six story. magnitude cycle at to anything. we times growing in activity really know, growth, date of to So you times construction, the seen all And market that's you a look weeks, that both going to both when in and Arizona probably and timelines and in to on has you been when development we've completely cycle different are the house, permit of well, maintain times. able cycle seeing haven't

market. So of but somewhere between. acquisition that's most to homes. challenging kind say so the recent, our it's I And again, in deliver at we're then Colorado are definitely under pressure They

it's market. again, So by market

Alex Barron

best Thanks a luck for of and great. year. the Okay, lot,

Leonard Miller

you. Thank

John Stephens

you. Thank

Operator

And this concludes ladies our and question-and-answer gentlemen, that, session. with

I'd back call to the Now, closing over to for management like remarks. turn

Lawrence Webb

seems made where forward more look if back Home It then progress to see and to we diversified. We're amazing XX have we The look when was New XX Thank really are months every you. on front. me months Company where we that today, and

Our in strong. aligned. to housing new is position. And in are company a that clear undersupplied our feel that, very a in margins market a and in situation better. team position management a only for done. thank really where the we And get they've in We're very positively wonderful work that We're about financial are us the are I The with you. going we and I and tailwind a it's stronger believe better. a market, are in I new marketplace. And we is

Operator

teleconference. today's concludes This

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

New Home (NWHM) 1 May 212021 Q1 Earnings call transcript