HCDI - Earnings call transcript Q4 2021 | Harbor Custom Development, Inc.

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Operator

Thank you for standing by and welcome to the Harbor Custom Development Inc. Fourth Quarter and Full Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session from previously submitted questions will follow the formal presentation.

As a reminder, this conference is being recorded. to of presenters, Brown, the Officer. like President Griffin, Chief now Chairman and Board would introduce Sterling today’s CEO, Financial I and Lance will Mr. over I the to turn now conference Brown.

Lance Brown

for Thank and Harbor Development’s conference quarter you, fourth earnings today. full XXXX thank all Custom year operator and call. Welcome joining you to us

the and call. discussion made in available were today, referring Relations The During be that and Investor will our can to our the at to the of presentation be we earnings release presentation press Harbor release www.harborcustomhomes.com. section prior found website

of of Before we subject cause a Any are statements Act everyone includes release begin, forward-looking of materially XXXX. I to Such risks, and could that today’s statements. today the remind discussed these number to Private actual factors would results the earnings like forward-looking from the other differ or that to Safe involve Litigation statements statements. Harbor in uncertainties contained call Securities forward-looking provisions Reform

industry included uncertainties, which see identify We and forward-looking statements risks Specifically statements. update are filings, principal to affect the and regarding future obligation recent our SEC assume our performance. could XXXX. any which Please for outlook no our

measures like or would the EBITDA will with I to Sterling. most today, we the non-GAAP of non-GAAP earnings reconciliation and these measure. of In addition, direct turn GAAP now including measures presentation our EBITDA providing our call margin. certain adjusted be appendix discussing EBITDA, comparable see financial adjusted to Please over for a

Sterling Griffin

I from We business for continued in labor performance begin recognizing chain the Their everyone pressures. with on allowed the XXXX dedication delivered industry full the Custom your strength demand conditions XX% year year-over-year other performance in for throughout in basis. strong call to to throughout during joining business significant and including on today. XXXX. revenue us to you, by increase Development. momentum. appreciate of despite Thank interest a employees they with and disruptions, the display supply impressive was the shortages finish year, pricing thanks The We Harbor benefited and contributed unique all and model our the our strong broader to Lance a to challenges, inflationary want

to we challenges these levels near-term, from as expect these the benefit expected by pricing are results. inventory or successfully persist our we to in near While throughout obstacles have financial lows, historic at continued evidenced With XXXX. strong navigated

segments continues nation’s market consistent Our distinct commute to XX to business regions of revenue. serving that some buying us fastest within multiple growing with provide the of plan XX home of of a minute the of stream

a product adapt expertise conditions and Our enables range to quickly allows optimized a buyers for better us to serve changing wide that diversified market strategy performance. of

and homes, condominiums We apartments. to including surrounding flexibility the target build us range are equipped wide single-family a communities’ townhomes, to needs, customers. and diverse This allows to of

Our low revenue in home lots, increase land, market the us for share. options, geographic residential and plans our finishing with areas, an portfolio to overall multifamily housing inventory opportunity and of provides of and coupled historic

commencement plan Punta anticipate XXXX. Mira, Bridge including multi-family Wyndstone, of we townhomes, Trails, and to Sunset, residential and build and condominiums Commons, View to addition In projects, in Mill’s Broadmoor and XX Ridge, Tanglewilde, sites, Westry or and our development apartments the on projects single-family Crossing, Pacific Olympic sell construction land continuation Gorda, Village

In operations largest our Washington expand have geographically. addition we we and market California. remains continue Western our to diverse Texas, that Florida portfolio, to in product

on new a we The to signed the Washington and expect for new arose workforce a hybrid quarter mind XXXX. the lot corporate pandemic. the in that in counts unit COVID-XX grown X, real employment into across trends designed of office to after our needs portfolio. XXXX headquarters with of an estate assets In October entire control a the account there our effort Tacoma, lease strategically We have second takes expanding space and is our relocate and office in space team,

increased growth, demonstrate revenues year each to and delivering of continue We operation. strong consistent

December total and revenues our XXXX For ended $XX.X and respectively. December the million XX, XX, $XX.X years XXXX, million were

As of and million and December fully of homes XX, XXXX the for XXXX, our XX, backlogs single-family residential were sale lots $XX.X executed of developed December $X.X contracts and respectively.

million build XX, backlog December XXXX X $XX as XX, of were and Our XXXX December and respectively. fee

our previous progress during in Our year. million condition sheet with We improve. $X.X the million to up financial strengthen the balance finished and XXXX continues significant $XX.X cash, made to year from

in to a that revolving business flexibility BankUnited. in year makes Brown, foundation already financial us $XX the demand further am the with our facility million our performance Chief balance strong of to conference Lance Officer end, Subsequent a to to We single and initiatives. us the strength I The our and to we to to I over provides business unique model announced continue beyond. and continued facility in our discuss positioned the further results. credit well will markets, strong turn financial on confident of drive and shareholder build Financial the sheet, value. pursue XXXX growth call of and multi-family invest liquidity closing with now deliver housing our our

Lance Brown

home of build $X.X lots and $X.X was revenue primarily increase to land $X.X by increase of $XX.X developed ended ended December an months compared million, for sales. million in quarterly December approximately the in XXXX. increased revenue sales million, a million offset months $X.X of in a by from to sales entitled $XX.X X for the On decrease as fee million XX, driven by basis, XX, XXXX revenues X X% The million

XX, primarily XX.X% ended margin gross and to months X increase entitled XXXX compared XX.X%. the sales for for of margin was was XX.X% sales X overall profit of developed X.X% months XX, profit gross The by ended the in XXXX. improvement Our December meaningful December land lot on driven

XXXX. in XXXX total X as December support to This plans. million compared infrastructure company Our our operating ended is future the growth for primarily XX, XX, million increase expenses to expenses continued investment the ended for increased months the anticipated December and operating public attributable personnel to to $X.X $X.X in X months

XXXX For the in of of net margins of a loss December months $X.X and increase was million quarterly was an net net improved for and the income $X.X X net million XXXX, income income record respectively. we The million primarily in new ended and $X.X The to in XXXX. revenue had a attributable improvement gross company. XX,

and million the was loss to $X.XX compared million quarter per million EBITDA For compared the had $X.X adjusted for XXXX XXXX, earnings was basic XXXX. $X.XX. to XXXX, of $X while million of per in December fourth a ended compared EBITDA $X.X months we share X XX, in to $X.X share

approximately to Turning December we basis, the XXXX. $XX.X are pleased for to to year December on for million XX, XX.X% the ended year the full XX, report year million as ended increased year, by compared XXXX $XX.X revenues full to a

in from of increase home $XX.X by primarily $XX.X increased XXXX $X.X build fee a revenue million, lands entitled and Our was $XX.X sales of of developed million of sales. million by in driven offset lots million, sales decrease

by was margin XX.X%. one the million to XXXX XX, margin land and increased personnel profit XXXX. expenses This year operating year highest Full in believe increase compared XX, $XX.X Our in ended December operating full the of infrastructure as sales $X.X increase December XXXX gross was total December plans. compared margin year entitled by continued future lot XX.X% in year gross developed strong and XX% expenses company support XXXX. for million of on the year to was XX, the ended We ended for anticipated primarily The growth year investment of December profit the gross ended the for public our XXXX our for to was X% XX.X% to for primarily XX, the full driven driven industry. the year

of compared XXXX. For XXXX, the by net XX, in revenue margins income year improvement gross $X.X and was increase a net driven million in $X.X December was XXXX million. improved primarily income The ended an in profit to net loss and

in compared XX, ended the ended was $X.XX. compared full was from for the XXXX, a XX, XX, was million million We and $X.X and the construction $XX.X $X prior EBITDA million, loss XXXX year year-over-year the the $XX.X million primary $XX.X XXXX. operating development able estate financing. with provided adjusted including the per cash cash to to which per opportune during by $XX.X $XX.X in of the million monetize was the the year at raise estate used XXXX, $XX.X most were unique basic of compared was totaling year million XXXX increase XXXX, and December December year. of operating million share of earnings issuances, of while million a was of significant model for For year, for our million, XXXX. $XX.X EBITDA assets the increase million. and $XX.X highlights real ended The We a Net loan ability in year use preferred assets $X.X during activities acquisition time. share from $X.XX, for cash year activities business real December to common stock capital and to of to value The million to ended from compared cash, amount

$XXX.X Our XXX% XXXX. as million approximately increased $XX.X December as December real to XXXX, have of million from assets of XX, estate XX,

approximately Sterling. estate will December I of to now back our real turn As XXXX, assets XX%. leveraged call were XX, the

Sterling Griffin

Thank you, Lance.

the estate assets we our in and As company. to of evidenced by in increase the future real have significant invest our continue

For million. to single XXXX, and approximately we guidance expect our in for the markets reiterate revenue family housing XXXX rental multifamily strength continued and $XXX

implies foundation increase of XXXX basis. our market on approximately beyond. adjusted focused on strong Our increase a which remain that during guidance to year-over-year believe a of XXXX, and implies a EBITDA current XX% our strengthening XXX%. anticipated a accelerate revenue and year-over-year reach growth have we and position $XX during market We million We

Operator

switch read announced to Brown previously fall. to I Mr. the Prior Question were session. for IR@harborcustomdev.com. million the last $XXX Griffin Mr. will one, to and the to respond will provide Global inquiries to. update everyone now you questions will who Thank an We number U.S. with credit submitted submitted to now call to questions. question-and-answer you submitted facility the Capital

Sterling Griffin

to fourth With go received The direction. this to Washington have And all decided project is submittal construction the three projects release Florida architectural the commitments plan different in Western secure the mentioned the project building still a of and for facility a plans loan other from for completion slated lenders. loan we permit we as loan stages. in this the well. After in original planning

Operator

price you two, stock why did move forward second round of a Question on preferred at $XX? number

Sterling Griffin

We are rapidly. growing very

these and and Our growth XXXX, critical healthy projects. Board raise We success. pipeline provide which multifamily the preferred a capital to team line of will executive XXXX of to component anticipate in offering opportunity additional as second our we as substantial an for saw projects secure Directors a top see

Operator

several changed to apartments? projects its Harbor has of Question from why number three, condominiums

Sterling Griffin

Over values for of has of This markets from the historically capitalization a seen revenues past and high levels, decreased created projects for a the year, great rents financial be the will apartment several have HCDI We of in caused for that apartment while have we rapid believe combination rates escalation the escalate suburbs to substantially. by we multifamily the serve. our years. a sale apartments income substantial next driven percentage opportunity in correspondingly

Operator

think real you increases continue do single in XXXX? to rental market four the in number apartment see and record family will rates estate home Question

Sterling Griffin

In the markets the answer yes. serve, we is

inventory have as increases see and home this single normal classic same escalating cycle and expect with is prices The demand has a XXXX. family supply, up will months apartment until This continue supply market units shortage described catches rent unprecedented months is rents to levels rental apartments expected demand. to supply We the four of you to to home reaches a the continue housing case to six rise. generally to levels. With of situation. prices until And continue driven in

Operator

projects at company sufficient growing complete five, current the current number to Question pace? does liquidity have your the continue and

Lance Brown

we call, on year with approximately we ended of today’s mentioned As $XX cash. million the

objectives. our on of real proven a Based from announced also monetization credit additional the our We both additional revolving hand, $XX liquidity. can liquidity estate our confident on and goals of recently we assets, growth track or our cash acquisition and facility achieve record credit facility feel the an for revolving the our execution our million we and which provides

Operator

Question think company future number allocation? six, does about capital how the

Lance Brown

but our debt our investing capital buybacks, strategic primary needs, and cash expenditures for to capital real Our including additional pay may assets, not in funding planned dividends. We also are stock downs in use preferred servicing of acquisitions. debt, estate limited consider uses XXXX and working equity

Operator

This now question-and-answer ends the portion.

Sterling Griffin

soon. everyone providing for forward Thank participating call. you, We in today’s look additional to updates

the under future and Relations You presentation the harborcustomhomes.com. on page, can find our Investor Events on about tab more website events information our

has the updates our your for you reached email we encourage on appreciate website. For to We Investor us tab the Thank at company up joining at questions for we sign If notifications on anyone or XXX-XXX-XXXX most recent Resources news, IR@harborcustomdev.com. be time. of you can today. further again

Operator

This your presentation. We participation. appreciate does conclude today’s

Harbor Custom Development (HCDPQ) 24 Mar 222021 Q4 Earnings call transcript