United Homes Group $94.827M Vs $108.437M YoY; EPS $(5.44) Vs $0.46 YoY

First Quarter 2023 Results

Operating Results

Net loss attributable to common stockholders was $204.5 million, or $(5.44) per diluted share, which included unrealized loss of $207.1 million predominantly due to changes in fair value on potential earn-out consideration due to increased stock price as of March 31, 2023. The earn-out consideration would be paid in common shares upon reaching certain stock price hurdles. The Company is required to record the fair value of this earn-out as derivative liabilities on the consolidated balance sheets. The net loss at March 31, 2023, is compared to net income of $17.0 million, or $0.46 per diluted share during the first quarter 2022.

"We are pleased to share our first quarterly results as a public company," said United Homes Group Chairman, President, and Chief Executive Officer, Michael Nieri. "While our financial results were impacted by the accounting of certain non-cash GAAP related items, we believe the underlying business performance was solid, as we generated adjusted EBITDA of approximately $9 million for the quarter and regained momentum on the sales front following the rate-induced slowdown in the back half of last year. Net new orders improved significantly relative to the fourth quarter of 2022 thanks to various strategic pricing initiatives that we implemented, which helped drive traffic and alleviate some of the affordability concerns brought about by higher mortgage rates. We are optimistic that our margins will expand throughout the remainder of the year because of the improved market conditions and lower lumber costs. Recent sales on new homes that will be built this year with current lumber costs are expected to generate, on average, adjusted gross margins of 23% and higher."

Mr. Nieri continued, "Looking forward, we believe that we are in a great position to generate strong returns for our shareholders, thanks to our favorable geographic positioning, our affordable product focus and our land light strategy. The funds we received as a result of going public have provided us with the necessary capital to achieve our growth objectives, and we are actively pursuing those opportunities. We are truly appreciative for everyone who had a hand in getting us to this point and are excited for the journey ahead."

Homebuilding revenues for the first quarter 2023 was $94.8 million, compared to $108.4 million in the first quarter 2022. Home closings during the first quarter 2023 were 328 compared to 414 in the year-ago quarter. Average sales price ("ASP") of 294 production-built homes (which excludes 34 general contractor and build for rent homes) closed during the first quarter 2023 was $314k, compared to $272k during the first quarter 2022 of 384 production-built homes (which excludes 30 general contractor and build for rent homes), representing a 15.5% increase.

Homebuilding gross profit margin during the first quarter of 2023 was 17.7% compared to 25.2% during the first quarter 2022. Homebuilding adjusted gross profit margin in the first quarter 2023 was 20.2%, compared to 26.0% in the first quarter 2022. The decline in both gross profit margin and adjusted gross profit margin can be largely attributable to the Company offering sales incentives and selling inventory with higher lumber costs. The Company expects margins to expand throughout the year due to closings on homes with current lumber costs and as we see price increases on new sales.

Selling, general and administrative expenses (SG&A) as a percentage of homebuilding revenues was 17.6% in the first quarter 2023, which included $4.5 million of equity-based compensation of which $4.4 million was a non-recurring expense related to the closing of the business combination. SG&A in the first quarter 2023 also includes $1.0 million of transaction related expenses. Excluding non-recurring equity-based compensation and transaction related expenses, SG&A for the first quarter 2023 was approximately 12.0% of homebuilding revenues.

Adjusted EBITDA during the first quarter 2023 was $8.5 million compared to $19.4 million during the first quarter 2022. This decrease is largely related to fewer closings and lower gross margins as described above.

New Orders / Backlog / Active Communities

Net new orders in the first quarter 2023 were 389 compared to 474 in the comparable quarter of 2022. Our cancellation rate was 13.4% for the first quarter 2023, compared to 14.4% for the comparable quarter in 2022.

As of March 31, 2023, the Company had a backlog of 320 homes, valued at $103.3 million, compared to a backlog of 276 homes, valued at $85.6 million as of December 31, 2022.

As of March 31, 2023, the Company had 52 active communities including 10 in the Upstate market (South Carolina), 33 in the Midlands market (South Carolina & Georgia) and 9 in the Coastal market (South Carolina).