UPDATE: The New Home Co. (NWHM) Reports Q2 Loss of $0.04, Revenues Miss; Offers 3Q Home Sales Outlook

The New Home Co. (NYSE: NWHM) reported Q2 EPS of ($0.04), versus $0.08 reported last year. Revenue for the quarter came in at $99 million versus the consensus estimate of $124.9 million.

Second Quarter 2020 Financial Results

• Net orders increased 6% compared to the 2019 second quarter
• June net orders increased 68% compared to June 2019, representing the highest monthly net order total in Company history
• Homes in backlog increased 14% compared to the 2019 second quarter
• Total revenues of $99.0 million vs. $162.7 million for the 2019 second quarter
• Net loss of $24.3 million, or ($1.32) per diluted share, including $39.0 million in inventory and joint venture impairments and $1.1 million in severance charges, compared to net income of $1.6 million, or $0.08 per diluted share, for the 2019 second quarter
• Adjusted net loss of $0.7 million*, or ($0.04) per diluted share, excluding impairments, severance charges and a net deferred tax asset remeasurement benefit
• Cash flow from operations of $4.7 million and cash and cash equivalents of $85.6 million
• Debt-to-capital ratio of 60.0% and a net debt-to-capital ratio of 51.5%*, a 620-basis point improvement from the 2019 second quarter
• Repurchased 817,300 shares of common stock during the quarter for $1.5 million, or an average of $1.80 per share

"The New Home Company made solid progress on a number of fronts in the second quarter of 2020. We generated positive order momentum as the quarter progressed, made additional improvements to our cost structure, and improved our balance sheet leverage as compared to the prior year period," remarked Larry Webb, Executive Chairman of The New Home Company. "We also took decisive action to address underperforming assets, which resulted in significant impairments and a loss for the quarter, but will provide us a better path forward both from a financial and strategic standpoint. As the COVID-19 pandemic is still impacting lives around the world, we continue to prioritize the health and safety of our employees, trade partners and home buyers. Despite the uncertainty related to this pandemic, I remain confident in our ability to navigate the road ahead."

Leonard Miller, President and Chief Executive Officer, stated, "After experiencing unprecedented uncertainty during the month of April, our monthly absorption pace improved sequentially each month with June ending at 3.6 net orders per community for the month, a 33% increase compared to June 2019. These results were driven by record-low interest rates and pent-up demand for new housing. Year-over-year orders for April and May decreased 56% and 5%, respectively, before increasing 68% in June, marking the highest monthly net order total in our Company’s history. The stronger demand later in the quarter contributed to a 14% increase in homes in backlog compared to the 2019 second quarter and positioned us for a better second half of 2020.”

Mr. Miller continued, “We generated $4.7 million of operating cash flow, and we ended the quarter with $85.6 million in cash and no borrowings outstanding on our bank credit facility. We strengthened our balance sheet by extending the maturity date of our bank credit facility to September 30, 2021 and repurchased $5.8 million in principal of our senior notes. We also repurchased 817,300 shares of our common stock during the quarter for $1.5 million, or $1.80 per share. Our net debt-to-total capital ratio was 51.5%, which represented a 620-basis point improvement compared to the 2019 second quarter.”

Mr. Webb concluded, "Although we incurred substantial impairments and a loss during the quarter, we were pleased with the progress we made, including our continued shift to more affordable price points, right-sizing our cost structure and strengthening our balance sheet. These positive developments have put our Company on more solid footing as we address the challenges ahead. While we have more work to do, the sales success we experienced to end the quarter, the resetting of certain asset positions, and the operational improvements we made give us confidence that The New Home Company is on the right track."

GUIDANCE:

The New Home Co. sees Q3 revenue of $100-115 million, versus the consensus of $151.8 million.

The Company’s current estimate for the 2020 third quarter is as follows:

• Home sales revenue of $100 - $115 million
• Fee building revenue of $10 - $15 million
• Home sales gross margin of 12.0% to 12.5%

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

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