The New Home Company Inc., Aliso Viejo, Ca. (NYSE: NWHM) on Thursday reported net income of $0.8 million, or $0.04 per share for the first quarter ended March 31, 2017, compared to a net loss of $0.8 million, or $(0.04) per share, in the prior year period. Analysts were expecting a loss of $0.03 per share.
Total revenue rose 47% to $125.0 million compared to the 2016 first quarter; home sales revenue was up 64% to $69.4 million. Closings rose 93% to 54. The average selling price declined 15% to $1.3 million due in part to a geographic shift to less expensive communities in Southern California.
New orders rose 125% to 126 as the active community count rose 40% to 14. Backlog rose 45% to 151 homes; backlog dollar value was up 34% to $313.9 million, a record for the company.
Gross margin from homes sales was 13.5% versus 13.3% in the prior year period. The increase in home sales gross margin was primarily due to a change in mix, including the favorable impact of higher margins from communities located in Newport Coast, CA. Adjusted gross margin from home sales for the 2017 first quarter, which excludes interest in cost of home sales was 15.7% compared to 14.8%.
SG&A was 14.5% versus 20.5% in the prior year period. The 600 basis point improvement in the SG&A rate was largely attributable to a 64% increase in home sales revenue, which was driven by a significant increase in new home deliveries due to growth in wholly owned operations and leverage of G&A expenses.
Fee building revenue for the 2017 first quarter increased 30% to $55.6 million. Fee building gross margin was $1.7 million, or 3.0%, compared to $2.0 million, or 4.7%, in the prior year period. The reduction in fee building gross margin percentage was largely due to a decrease in management fees received from joint ventures, which were $1.2 million during the 2017 first quarter compared to $2.2 million in the prior year period. The decrease in management fees from JVs was primarily the result of fewer deliveries and lower revenues from JV communities, which is consistent with the company’s strategic shift to emphasize wholly owned operations.
The company’s share of joint venture income for the 2017 first quarter was $0.3 million, compared to a $7,000 loss in the prior year period.
Total revenue of the JVs was $26.6 million and net loss was $(0.9) million, compared to $42.0 million and $2.1 million in income in the prior year period, respectively. Home sales revenue of the JVs was $25.1 million, compared to $38.2 million in the prior year period.
At the end of the 2017 first quarter, the JVs had nine active selling communities, up from six at the end of the prior year period. Net new home orders from JVs for the 2017 first quarter decreased 15% to 39 homes as compared to 46 homes in the prior year period. The dollar value of homes in backlog from unconsolidated JVs at the end of the 2017 first quarter was $64.0 million from 69 homes, compared to $94.7 million from 101 homes in the prior year period.
On March 17, 2017, the company completed the sale of $250 million in 7.25% Senior Notes due 2022. Proceeds from the notes were used to repay the outstanding balance under the company’s revolving credit facility, with the balance to be used for general corporate purposes.
As of March 31, 2017, the company had real estate inventories totaling $322.0 million, of which $192.4 million represented work-in-process and completed homes (including models), $87.1 million in land and land under development, and $42.5 million in land deposits and pre-acquisition costs. The company owned or controlled 1,670 lots through its wholly owned operations (excluding fee building and joint venture lots), of which 1,036 lots, or 62%, were controlled or under option. New Home ended the quarter with $110.1 million in cash and cash equivalents and had no borrowings outstanding under its $260.0 million revolving credit facility. The company ended the 2017 first quarter with $241.7 million in debt outstanding (net of unamortized discount and debt issuance costs), a debt-to-capital ratio of 49.6% and a net debt-to-capital ratio of 34.9%.
The Company maintained its full year guidance for 2017 as follows:
- Home sales revenue of $530 – $570 million
- Fee building revenue of $130 – $150 million
- Income from unconsolidated joint ventures of $4 – $6 million
- Wholly owned active year-end community count of 18
- Joint venture active year-end community count of 8
“The demand we saw in the first quarter is further evidence that California continues to be one of the strongest housing markets in the country,” said New Home’s Chief Executive Officer Larry Webb. “The state’s track record of creating good paying jobs and its ongoing lack of available supply have created a significant need for new housing in a number of markets.”
