The New Home Co. (NWHM) Reports Q3 EPS of $0.06, Revenues Beat; Offers 4Q Revenue Guidance Below Consensus

The New Home Co. (NYSE: NWHM) reported Q3 EPS of $0.06, versus ($0.23) reported last year. Revenue for the quarter came in at $130.8 million versus the consensus estimate of $124.9 million.

Third Quarter 2020 Financial Results

• Net income of $1.2 million, or $0.06 per diluted share, compared to a net loss of $4.6 million, or $(0.23) per diluted share, for the 2019 third quarter
• Homes sales revenue of $117.4 million as compared to $118.8 million for the 2019 third quarter
• New home deliveries of 157 as compared to 124 in the 2019 third quarter, a 27% increase
• Home sales gross margin of 14.2% as compared to 9.5% for the 2019 third quarter
• A 320 basis point improvement over the 2019 third quarter gross margin of 11.0%* excluding $1.7 million of impairments
• Net new orders of 251 as compared to 124 in the 2019 third quarter, a 102% increase
• Monthly sales absorption of 3.5 per community as compared to 2.0 per community in the 2019 third quarter, a 75% increase
• Homes in backlog of 329 homes as compared to 207 homes at the end of the 2019 third quarter, a 59% increase
• Cash flow from operations of $40.0 million and cash and cash equivalents of $126.4 million as of September 30, 2020
• Debt-to-capital ratio of 59.4% and a net debt-to-capital ratio of 45.1%*, a 980 basis point improvement from the 2019 third quarter

"The New Home Company made significant progress during the third quarter through strong sales, improved gross margins and solid operating cash flows," remarked Larry Webb, Executive Chairman of The New Home Company. "We experienced strong monthly sequential order growth during the quarter with September generating the highest monthly order total in our Company’s history. Our monthly sales absorption rate for the quarter was up 75% to 3.5 homes per community, with our Arizona operation leading the way at a sales absorption rate of 4.1 homes per community driven by seven recently opened communities. We expect these new communities to begin contributing to our profitability in the fourth quarter and have a meaningful impact on gross margin thereafter. The 102% increase in third quarter net orders also led to a 59% increase in our ending backlog and has set us up for a solid finish to the year.”

“Our expansion into more affordably priced communities has been a key driver for gross margin improvement in the third quarter, and we see similar margins for homes in our backlog,” added Leonard Miller, President and Chief Executive Officer. “Faster inventory turns and price increases at nearly all of our communities contributed to higher gross margins, especially at our more affordably priced communities. This margin growth coupled with $40 million in operating cash flow and a 45.1% net debt-to-capital ratio at the end the quarter provides us with a strong foundation moving forward.”

Mr. Miller concluded, “We made further progress in strengthening our balance sheet in October through the issuance of $250 million of new 7.25% senior unsecured notes due 2025 to fund, together with cash on hand, the redemption of all of the Company’s existing senior notes due 2022. We also entered into a new $60 million unsecured credit facility due April 2023. The refinance of our senior notes and our new credit facility extend our debt maturity profile and give us the flexibility to replenish our land positions, continue our product offering expansion and improve our operating results. With stronger operations and longer-term capital to reinvest in our land pipeline, we are optimistic about the future of The New Home Company and our ability to generate positive shareholder value.”

GUIDANCE:

The New Home Co. sees Q4 2020 revenue of $115-125 million, versus the consensus of $151.8 million.

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

• Home sales revenue of $115 - $125 million
• Fee building revenue of $5 - $8 million
• Home sales gross margin of 13.8% to 14.2%

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

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