UCP, Inc. (NYSE:UCP), San Jose, on Monday morning announced net income of $9.3 million for the quarter ended Dec. 31, 2016, up from $7.6 million for the prior-year period. Net income attributable to Class A common stockholders was $7.2 million, or $0.89 per share, compared to $3.2 million, or $0.40 per share, for the prior-year period. The results included a $5.6 million tax benefit, the majority of which was in connection with the removal of UCP’s valuation allowance of $5.5 million on its deferred tax asset as of December 31, 2016.
Analysts polled by Dow Jones were expecting a gain of $0.20 per share.
Home-building revenue increased 17.5% to $104.4 million, compared to $88.9 million for the 2-15 quarter. The improvement was driven by a 15.2% increase in homes delivered to 257, compared to 223 during the prior year period, led by increased deliveries of 22.8% in the West. The average selling price of a home increased 1.8% to $406,000 per home compared to the prior year period.
Net new home orders increased 26.1% to 232, compared to 184 for the prior year period, led by a 31.7% increase in net new home orders in the West. The average number of selling communities remained consistent with the prior year period at 28. Unit backlog at the end of the quarter was up 45.4% to 362, compared to 249 at the end of the prior year period. Unit backlog in the Southeast improved 64.1% to 105 homes. Backlog on a dollar basis increased 37.6% to $149.6 million, compared to $108.8 million at the end of the prior year period.
Total lots owned and controlled were 6,638 at December 31, 2016, compared to 5,878 at December 31, 2015. UCP reduced its number of owned lots by 720 lots to 4,031 and increased its number of controlled lots by 1,480 lots to 2,607, as UCP continues to prudently manage its inventory and strive to expand its return on equity and assets.
Home-building gross margin percentage was 18.6%, compared to 18.0% a year earlier. Adjusted home-building gross margin percentage was 20.9%, compared to 21.1% for the prior year period, due primarily to inflationary increases in material and labor costs. Consolidated gross margin percentage was 18.5%, compared to 19.6% for the prior year period, primarily as a result of lower revenue from a significant land sale in the fourth quarter of 2015.
Sales and marketing expense was $5.7 million, or flat compared to the prior year period. As a percentage of total revenue, sales and marketing expense increased slightly to 5.4%, compared to 5.3% for the prior year period, due to a reduction in land development revenue. Sales and marketing expense as a percentage of home-building revenue improved by 100 basis points year-over-year.
General and administrative expense was $10.1 million, compared to $7.6 million for the prior year period. General and administrative expense in the fourth quarter 2016 included approximately $1.3 million of one-time expenses associated with professional fees in connection with capital market activities, which was partly offset by tightly managing other G&A expenses. As a percentage of total revenue, general and administrative expense was 9.6% compared to 7.1% for the prior year period, primarily attributable to the one-time costs in the fourth quarter of 2016 and a reduction in land development revenue.
For the full year, net income increased to $14.4 million, compared to $5.8 million for 2015. Net income attributable to Class A common stockholders was $9.2 million, or $1.15 per share, compared to $2.4 million, or $0.30 per share, for the prior year.
“During the year, our efforts to design innovative homes and uphold best in class construction standards allowed us grow home-building revenues and improve home-building gross margin, despite inflationary increases in material and labor costs,” said Dustin Bogue, UCP president and CEO. “In the fourth quarter, the West division continued to be the main driver of growth, with home deliveries growing 22.8% and net new home orders growing 31.7%, on the strength of demand from our first-time and move down home buyer.”
