The New Home Co. (NWHM) Tops Q4 EPS by 4c, Revenues Beat; Offers Q1 Revenue Guidance Above Consensus

The New Home Co. (NYSE: NWHM) reported Q4 EPS of $0.15, $0.04 better than the analyst estimate of $0.11. Revenue for the quarter came in at $222.1 million versus the consensus estimate of $175.4 million.

Fourth Quarter 2019 Financial Results

• $62.7 million of cash flow from operations resulting in $22.6 million of net debt reduction and a $38.4 increase in cash during the quarter
• Debt-to-capital ratio of 56.7% and a net debt-to-capital ratio of 49.2%*, a 570 basis point sequential improvement from the third quarter
• Net orders up 106%, monthly absorption rate increased 83% to 2.2 compared to 1.2 for the 2018 fourth quarter
• Total revenues of $222.1 million, including $17.1 million of land sales revenue
• Home sales revenue of $173.9 million vs. $187.3 million for the 2018 fourth quarter
• Net loss of $3.0 million, or ($0.15) per diluted share, including $10.1 million of pretax inventory and joint venture impairment charges
• Adjusted net income of $3.1 million*, or $0.15 per diluted share*, excluding impairment charges

"2019 was a pivotal year for our Company as we committed early in the year to generating cash flow, deleveraging our balance sheet, and improving SG&A efficiency to address a weaker housing market to start the year," remarked Larry Webb, Executive Chairman of The New Home Company. "By the end of 2019, we had generated $121 million in operating cash flow, reduced our net debt by approximately $83 million, and established a more streamlined cost structure which included right-sizing our operations by reducing headcount, along with improved selling, marketing and administrative expense leverage. At the end of 2019, our net debt-to-capital ratio was 49.2%*, a 980 basis point year-over-year improvement."

Leonard Miller, President and Chief Executive Officer stated, "Buyer demand steadily improved throughout the year with our monthly net new orders up for the final five months of 2019. The 2019 fourth quarter was particularly strong with our monthly sales pace up 83% resulting in a 106% increase in net new orders over the prior year period. Demand was strongest at our more affordable, entry level communities where monthly absorption increased to 3.3 for the 2019 fourth quarter, further underscoring the benefit of our ongoing strategy to diversify our product portfolio and expand our customer base. Additionally, our backlog conversion rate improved to 97% for the 2019 fourth quarter from 61% for the 2018 fourth quarter as we continued to capitalize on the shorter build cycles and quicker conversion of spec homes that our more affordable product provided resulting in higher inventory turns and a 7% increase in new home deliveries for the 2019 fourth quarter."

Mr. Miller concluded, "The improvements we made during 2019 to our financial leverage ratios, our product diversification and our cost structure, coupled with a favorable fundamental backdrop for our industry, give us optimism for our Company\'s prospects as we enter the new year."

GUIDANCE:

The New Home Co. sees Q1 2020 revenue of $95-120 million, versus the consensus of $80.3 million.

The Company's current estimate for the 2020 first quarter is as follows:

• Home sales revenue of $75 - $90 million
• Fee building revenue of $20 - $30 million
• Home sales gross margin of 11.8% - 12.1%

For earnings history and earnings-related data on The New Home Co. (NWHM) click here.

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