Attached files
| file | filename |
|---|---|
| 8-K - 8-K - UCP, Inc. | ucp8-kq32016coverresults.htm |
| EX-99.1 - EXHIBIT 99.1 - UCP, Inc. | ucpq32016pressrelease.htm |
3Q16 Earnings Presentation
October 31, 2016
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Forward-Looking Statements
We make forward-looking statements in this presentation that are subject to risks, uncertainties and assumptions. All statements other
than statements of historical fact included in this presentation are forward-looking statements. You can identify forward-looking
statements by the fact that they do not relate strictly to historical facts. These statements may include words such as “may,” “might,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” “project,” “goal,” “intend” or “continue,” the
negative of these terms and other comparable terminology. These forward-looking statements may include projections of our future
financial or operating performance, our anticipated growth strategies, anticipated trends in our business and other future events or
circumstances. These statements are based on our current expectations and projections about future events and may prove to be
inaccurate.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events.
Forward-looking statements depend on assumptions, data or methods which may prove to be incorrect or imprecise and may prove to be
inaccurate. We do not guarantee that the transactions and events described in any forward-looking statements will happen as described
(or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from
those set forth or contemplated in the forward-looking statements: economic changes, either nationally or in the markets in which we
operate, including declines in employment, volatility of mortgage interest rates, declines in consumer sentiment and an increase in
inflation; downturns in the homebuilding industry, either nationally or in the markets in which we operate; continued volatility and
uncertainty in the credit markets and broader financial markets; the operating performance of our business; changes in our business and
investment strategy; availability of land to acquire and our ability to acquire land on favorable terms or at all; availability, terms and
deployment of capital; disruptions in the availability of mortgage financing or increases in the number of foreclosures in our markets;
shortages of or increased prices for labor, land or raw materials used in housing construction; delays or restrictions in land development
or home construction, or reduced consumer demand resulting from adverse weather and geological conditions or other events outside
our control; the cost and availability of insurance and surety bonds; changes in, or the failure or inability to comply with, governmental
laws and regulations; the timing of receipt of regulatory approvals and the opening of communities; the degree and nature of our
competition; our leverage and debt service obligations; our future operating expenses, which may increase disproportionately to our
revenue; our ability to achieve operational efficiencies with future revenue growth; our relationship, and actual and potential conflicts of
interest, with PICO, which owns a majority economic interest in UCP, LLC; and availability of, and our ability to retain, qualified
personnel. For a further discussion of these and other factors, see the “Risk Factors” disclosed in our Annual Report on Form 10-K for
the year ended December 31, 2015, which is filed with the Securities and Exchange Commission. In light of these risks and
uncertainties, the forward-looking statements discussed in this presentation might not occur.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this presentation. While
forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance, and our actual results could
differ materially from those expressed in any forward-looking statement. We disclaim any obligation to publicly update or revise any
forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or
other changes, except as required by law.
2
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• SG&A % Revenue -380 bps to
10.1%
• HB Gross Margin of 18.5% and
Adj. HB Gross Margin1 of 21.0%
• Another Quarter of consecutive
profitability
• $1.0 million of stock2 repurchased
• Maintaining a conservative
balance sheet
Momentum31
Discipline32Transformation3
• Homebuilding Revenue +28%
• Net New Home Orders +14%
• Backlog Units +34%
(1) Adjusted homebuilding gross margin is a non-GAAP financial measure. The most directly comparable GAAP financial measure is homebuilding gross margin. A discussion of adjusted
homebuilding gross margin is included in the Appendix hereto, as well as a reconciliation between homebuilding gross margin and adjusted homebuilding gross margin.
(2) The timing and amount of any repurchases will be at UCP’s discretion and will be subject to prevailing market conditions and other considerations, including UCP’s liquidity, the terms of
its debt instruments, planned land investment and development spending, acquisition and other investment opportunities and ongoing capital requirements.
(3) 3Q16 Compared to 3Q15
3
Continued Progress on Objectives
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+28
%
Momentum: Homebuilding Revenue
Homebuilding Revenue Homes Delivered Average Selling Price
Mix of Homes Delivered by Region Homes Delivered
4
3Q15 3Q16
ASP ($000)
$348
$451
3Q15 3Q16
Homes Delivered
202 199
West
78%
Southeast
22%
+30%
3Q15 3Q16
Homebuilding Revenue ($MM)
$70.3
$89.8
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3Q15 3Q16
288
387
Momentum: Markets, New Orders & Backlog
UCP Homebuilding Markets
Net New Home OrdersBacklog Dollar Basis ($000's)
5
Southeast
Southern
California
Central
Valley
Pacific
Northwest
Note: ‘Land inventory’ denotes owned & controlled lots as of September 30, 2016.
Homes in Backlog
SF Bay Area
3Q15 3Q16
216 247
+34%
+14%
3Q15 3Q16
$120,834
$157,176
+30%
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Discipline: Gross Margin
6
HighlightsHomebuilding Gross Margin
▪ 3Q16 adjusted homebuilding
gross margin1 trending in line with
full year expectations
▪ Maintaining sales prices in order
to manage demand, given supply
constraints
▪ Balancing pre-sales and spec
sales
▪ Actively managing land and home
construction costs
▪ Incentives decreased to 1.6%
from 2.4% of HB Revenue
▪ Exiting the Bakersfield, California
market
(1) Adjusted homebuilding gross margin is a non-GAAP financial measure. The most directly comparable GAAP financial measure is homebuilding gross margin. A discussion of adjusted
homebuilding gross margin is included in the Appendix hereto, as well as a reconciliation between homebuilding gross margin and adjusted homebuilding gross margin.
Adj. Homebuilding Gross Margin1
3Q15 3Q16
18.9%
18.5%
+(40) bps
3Q15 3Q16
21.1% 21.0%
+(10) bps
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3Q15 3Q16
6.4%
5.2%
Discipline: SG&A Improvement
7
Sales & Marketing as % of Total
Revenue
G&A as % of Total Revenue Highlights
▪ 3Q16 SG&A as a percent of total
revenue decreased 380 bps to
10.1%
▪ 3Q16 G&A improved 120 basis
points excluding $2.4 million
reduction in contingent
consideration
▪ Disciplined control of overhead
expenses continues to enhance
performance
▪ More efficient cost base to
leverage rising revenue and
deliveries
3Q15 3Q16
7.5%
4.9%
-260 bps
-120 bps
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West
69%
Southeast
31%
Transformation: Inventory Management & Earnings
Land Inventory by Region
Completed HomesHomes under Construction
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Note: ‘Land inventory’ denotes owned & controlled lots as of September 30, 2016.
UCP, Inc. Diluted Earnings (Loss) Per Share
3,798 Lots
1,686 Lots
Under contract
for sale
276
65.6%
Model homes
9
2.1%
Unsold homes
136
32.3%
Under contract
for sale
43
31.2%
Model homes
60
43.5%
Unsold homes
35
25.4%
3Q
2015
3Q
2016
YTD
2015
YTD
2016
$0.20 $0.16
$(0.11)
$0.26
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Balance Sheet Strength
9
(1) The ratio of net-debt-to-capital is a non-GAAP financial measure. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe
that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. A discussion of
net-debt-to-capital is included in the Appendix hereto, as well as a reconciliation between net-debt-to-capital and debt-to-capital.
(2) Interest coverage is computed using EBIT, a non-GAAP financial measure. EBIT is computed from GAAP pre-taxable income by adding back interest expense. The interest
coverage ratio is calculated by comparing EBIT to interest expensed.
(3) Interest coverage calculated on a last twelve months’ basis.
($ in millions, except where noted) Sep 30, 2016 Jun 30, 3016 Mar 31, 2016 Dec 31, 2015
Cash $ 27.6 $ 32.8 $ 29.8 $ 39.8
Real Estate Inventory $ 381.7 $ 374.4 $ 371.6 $ 361.0
Debt $ 157.8 $ 162.7 $ 158.6 $ 156.0
Equity $ 217.5 $ 214.8 $ 217.8 $ 217.4
Debt-to-Capital 42.0% 43.1% 42.1% 41.8%
Net Debt-to-Capital1 40.0% 40.3% 39.8% 37.6%
Trailing 12 Month Interest Coverage
Net Income before tax $ 13.1 $ 13.7 $ 10.3 $ 5.9
Interest Expense $ 7.9 $ 7.1 $ 6.2 $ 5.6
EBIT $ 21.0 $ 20.8 $ 16.5 $ 11.4
Interest Incurred $ 12.4 $ 12.3 $ 11.9 $ 11.6
Interest Coverage2,3 1.7 times 1.7 times 1.4 times 1.0 times
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2014 2015 2016E
$155
$253
$325
Building on Strong Track Record of Growth
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▪ Growing home deliveries and
revenue to expected record
highs in 2016
▪ Scalable corporate
infrastructure in place to
support growth and ROE
▪ Strong backlog to support
growth
▪ Expect higher homebuilding
revenue in 4Q16 compared to
4Q15
+45% CAG
R
~
Homebuilding Revenue ($MM)
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Financial Summary
11
(1) Adjusted homebuilding gross margin is a non-GAAP financial measure. The most directly comparable GAAP financial measure is homebuilding gross margin. A discussion of adjusted
homebuilding gross margin is included in the Appendix hereto, as well as a reconciliation between homebuilding gross margin and adjusted homebuilding gross margin.
Three Months Ended September 30, Nine Months Ended September 30,
($ in millions, except where noted) 2016 2015 2016 2015
Net Orders 247 216 701 676
Homebuilding Deliveries 199 202 563 478
ASP (000s) $ 451 $ 348 $ 425 $ 342
Revenue
Homebuilding $ 89.8 $ 70.3 $ 239.5 $ 163.7
Land development $ 3.9 $ 1.1 $ 5.3 $ 3.2
Other $ — $ 2.3 $ — $ 5.1
Total revenue $ 93.7 $ 73.7 $ 244.8 $ 171.9
% Growth 27.1% 42.4%
Homebuilding Gross Margin 18.5% 18.9% 18.1% 17.7%
Homebuilding Adjusted Gross Margin ¹ 21.0% 21.1% 20.6% 19.7%
Operating Expense
Sales and marketing $ 4.9 $ 4.7 $ 13.6 $ 13.2
General and administrative $ 4.6 $ 5.5 $ 19.1 $ 19.3
Goodwill impairment $ 4.2 $ — $ 4.2 $ —
Total operating expense $ 13.7 $ 10.2 $ 36.9 $ 32.6
Other income, net $ 0.2 $ 0.0 $ 0.3 $ 0.2
Net income (loss) before income taxes $ 3.3 $ 3.8 $ 5.5 $ (1.8)
Provision for income taxes $ (0.1) $ — $ (0.3) $ —
Net income (loss) $ 3.1 $ 3.8 $ 5.2 $ (1.8)
Totals may not add due to rounding
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Appendix – Gross Margin and Adj. Gross Margin Reconciliation
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(1) Adjusted homebuilding gross margin percentage is a non-GAAP financial measure. The most directly comparable GAAP financial measure is homebuilding gross margin. Adjusted
gross margin is defined as gross margin plus capitalized interest, impairment and abandonment charges. We use adjusted gross margin information as a supplemental measure when
evaluating our operating performance. We believe this information is meaningful, because it isolates the impact that leverage and non-cash impairment and abandonment charges have
on gross margin. However, because adjusted gross margin information excludes interest expense and impairment and abandonment charges, all of which have real economic effects
and could materially impact our results, the utility of adjusted gross margin information as a measure of our operating performance is limited. In addition, other companies may not
calculate adjusted gross margin information in the same manner that we do. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin
information as a measure of our performance. The table above provides a reconciliation of adjusted gross margin numbers to the most comparable GAAP financial measure.
Three Months Ended September 30,
2016 % 2015 %
($ in thousands)
Consolidated Gross Margin & Adjusted Gross Margin
Revenue $ 93,740 100.0% $ 73,672 100.0%
Cost of Sales 77,010 82.2% 59,680 81.0%
Gross Margin 16,730 17.8% 13,992 19.0%
Add: interest in cost of sales 2,214 2.4% 1,443 2.0%
Add: impairment and abandonment charges 223 0.2% 144 0.2%
Adjusted Gross Margin(1) $ 19,167 20.4% $ 15,579 21.1%
Consolidated Gross margin percentage 17.8% 19.0%
Consolidated Adjusted gross margin percentage(1) 20.4% 21.1%
Homebuilding Gross Margin & Adjusted Gross Margin
Homebuilding revenue $ 89,840 100.0% $ 70,284 100.0%
Cost of home sales 73,176 81.5% 57,006 81.1%
Homebuilding gross margin 16,664 18.5% 13,278 18.9%
Add: interest in cost of home sales 1,990 2.2% 1,443 2.1%
Add: impairment and abandonment charges 192 0.2% 119 0.2%
Adjusted homebuilding gross margin(1) $ 18,846 21.0% $ 14,840 21.1%
Homebuilding gross margin percentage 18.5% 18.9%
Adjusted homebuilding gross margin percentage(1) 21.0% 21.1%
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Appendix – Ratio of Net Debt to Capital
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(1) The ratio of net debt-to-capital is a non-GAAP financial measure. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe that our leverage ratios
provide useful information to the users of our financial statements regarding our financial position and cash and debt management. The ratio of net debt-to-capital is computed as the quotient
obtained by dividing net debt (which is debt less unrestricted cash and cash equivalents) by the sum of net debt plus stockholders’ and member's equity. We believe the ratio of net debt-to-
capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. We reconcile this non-GAAP
financial measure to the ratio of debt-to-capital in the table above. In addition, other issuers or issuers in other industries may not calculate net debt-to-capital ratio in the same manner that
we do. Accordingly, the net debt-to-capital ratio should be considered only as a supplement to the ratio of debt-to-capital information as a measure of our financial leverage.
As of September 30, 2016 As of December 31, 2015
Debt $ 157,785 $ 155,966
Equity 217,472 217,408
Total capital $ 375,257 $ 373,374
Ratio of debt-to-capital 42.0% 41.8%
Debt $ 157,785 $ 155,966
Net cash and cash equivalents $ 28,486 $ 40,729
Less: restricted cash and minimum liquidity requirement 15,900 15,900
Unrestricted cash and cash equivalents $ 12,586 $ 24,829
Net debt $ 145,199 $ 131,137
Equity 217,472 217,408
Total adjusted capital $ 362,671 $ 348,545
Ratio of net debt-to-capital (1) 40.0% 37.6%
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Appendix – EBIT
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(1) EBIT (“earnings before interest & tax”) is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income before taxes. EBIT is computed from GAAP
pre-taxable income by adding back interest expense. We believe that EBIT provides useful information to the users of our financial statements regarding our operating profitability. We
reconcile this non-GAAP financial measure to net income before taxes, based on the last twelve months, in the table above. In addition, other issuers or issuers in other industries may not
calculate EBIT in the same manner that we do. Accordingly, EBIT should be considered only as a supplement to the net income before taxes as a measure of our operating profitability.
(2) Interest coverage is computed using EBIT, a non-GAAP financial measure. The interest coverage ratio is calculated by comparing EBIT to interest expensed. We believe that interest
coverage ratio is a relevant financial measure for investors to understand our debt and profitability of our operations and as an indicator of our ability to pay interest on our debt.
UCP Interest Coverage
Last Twelve Months Ended
12/31/2015 3/31/2016 6/30/2016 9/30/2016
Pre-Tax Income $ 5,852,371 $ 10,264,488 $ 13,688,950 $ 13,148,622
Interest Expense included in COS 5,592,089 6,206,376 7,094,160 7,863,660
EBIT 11,444,460 16,470,864 20,783,110 21,012,282
Depreciation 587,581 593,633 635,155 615,826
Amortization 34,000 34,000 34,000 34,000
EBITDA 12,066,041 17,098,497 21,452,265 21,662,108
Impairments 923,031 923,031 3,320,014 3,511,793
EBITDA (excluding Impairments) $ 12,989,072 $ 18,021,528 $ 24,772,279 $ 25,173,901
Interest Incurred $ 11,567,368 $ 11,881,038 $ 12,260,522 $ 12,368,921
Interest Coverage 0.99 1.39 1.70 1.70