Landsea Homes Reports Second Quarter 2023 Results

Second Quarter 2023 Highlights

Net income attributable to Landsea Homes of $4.9 million, or $0.12 per diluted share
Total revenue of $293.2 million
Pretax income of $7.5 million
Adjusted EBITDA of $27.0 million
Total homes delivered of 539
Net new home orders increased 5% to 565 with an order value of $324.4 million
Quarter-end homes in backlog of 722 for a total of $455.8 million
Repurchased 969,000 shares of common stock for $7.5 million
Book value per share of $16.77

DALLAS, Aug. 01, 2023 (GLOBE NEWSWIRE) -- Landsea Homes Corporation (Nasdaq: LSEA) (“Landsea Homes” or the “Company”), a publicly traded homebuilder, reported financial results for the second quarter ended June 30, 2023. For the quarter, the Company reported pretax net income of $7.5 million, and net income of $4.9 million, or $0.12 per share. Prior year reported pretax net income was $23.2 million with net income of $14.9 million, or $0.34 per share. Adjusted net income (a non-GAAP measure) was $13.0 million or $0.33 per share. For the prior year period adjusted net income was $30.8 million, or $0.71 per share.

Management Commentary

“Landsea Homes made solid progress on a number of fronts in the second quarter of 2023, generating healthy profits and strong order results while executing on its long-term strategy of continued market expansion”, said John Ho, Landsea Homes’ Chief Executive Officer. “We recorded net income of $4.9 million for the quarter, or $0.12 per diluted share, largely driven by a new home delivery total that came in well in excess of our stated guidance. We were able to sell and close homes in a more timely manner during the quarter thanks in large part to improvements we’ve seen with the supply chain and product availability. We are optimistic that we’ll see further improvement in the back half of the year.”

Mr. Ho continued, “We remain focused on scaling our operations in high-growth markets to achieve better economies of scale. To that end, we announced the closing of a $250.0 million private placement notes offering last month, which will provide us with the necessary capital to fuel the next phase of our company’s growth. We have made great strides in establishing a significant presence in our markets through both acquisitions and organic growth, and we look forward to building on that success in the near future.”

Mr. Ho concluded, “We believe that housing industry fundamentals continue to favor the new home market due to a lack of existing home inventory, and that Landsea is well positioned to capitalize on this dynamic. We have strategically expanded into some of the best and fastest growing MSAs in the country with great long-term demand outlooks. In addition, our High-Performance Home series is designed to stand out from the competition and appeal to today’s entry level and first move-up buyer. As a result, I remain confident in our company’s prospects for the remainder of the year and beyond.”

Operating Results

Total revenue was $293.2 million in the second quarter, down 20.5% compared to the second quarter of 2022, primarily driven by a 5.8% decrease in homes closed and a 11.7% decrease in average sales price.

New homes delivered totaled 539 homes at an average sales price of $541,000 compared to 572 homes delivered at an average sales price of $613,000 in the second quarter of 2022.

Net new home orders were 565 homes with a dollar value of $324.4 million, an average sales price of $574,000 and a monthly absorption rate of 3.3 sales per active community. This compares to 538 homes with a dollar value of $322.5 million, an average sales price of $599,000 and a monthly absorption rate of 3.3 sales per active community in the prior year period. Strong demand continued throughout the quarter and into July. As a percentage of gross orders, cancellations equaled 11.0% as compared to 15.9% in the prior quarter and 11.1% a year ago.

Total homes in backlog were 722 homes with a dollar value of $455.8 million and an average sales price of $631,000 at June 30, 2023. This compares to 1,571 homes with a dollar value of $902.1 million and an average sales price of $574,000 at June 30, 2022.

Total lots owned or controlled at June 30, 2023, was 11,008 compared to 13,017 at June 30, 2022. We continue to leverage our asset-light strategy, controlling 54.4% of our lots at the end of the second quarter of 2023.

Home sales gross margin was 17.4% compared to 21.3% in the prior year period. Excluding a $4.7 million inventory impairment, our home sales gross margin was 19.0%. Adjusted home sales gross margin (a non-GAAP measure) was 23.5% compared to 29.1% in the prior year period. The decrease was primarily attributed to the increase in sales discounts and incentives.

Net income attributable to Landsea Homes was $4.9 million compared to $14.9 million in the prior year period. Adjusted net income attributable to Landsea Homes (a non-GAAP measure) was $13.0 million compared to $30.8 million in the prior year period. Net income per share on a fully diluted basis was $0.12 compared to $0.34 in the second quarter of 2022. Adjusted net income per share (a non-GAAP measure) on a fully diluted basis was $0.33 compared to $0.71 in the second quarter of 2022.

Adjusted EBITDA (a non-GAAP measure) was $27.0 million compared to $56.6 million in the prior year period.

Balance Sheet

As of June 30, 2023, the Company had total liquidity of $261.1 million consisting of cash and cash equivalents and cash held in escrow of $76.1 million and $185.0 million in availability under the Company’s $675.0 million unsecured revolving credit facility. Total debt was $482.7 million compared to $505.4 million at December 31, 2022.

Landsea Homes’ ratio of debt to capital was 40.4% at June 30, 2023 and the Company’s net debt to total capital (a non-GAAP measure) was 34.0% at June 30, 2023.

2023 Outlook

Third quarter 2023

New home deliveries anticipated to be in the range of 400 to 475
Delivery ASPs expected to be in the range of $535,000 to $545,000
Home sales gross margin of approximately 19%

Full year 2023

New home deliveries anticipated to be in the range of 1,900 to 2,100
Delivery ASPs expected to be in the range of $550,000 to $560,000

Conference Call

The Company will hold a conference call today at 9:00 a.m. Central Time (10:00 a.m. Eastern time) to discuss its second quarter 2023 results.

Toll-free dial-in number: 1-877-704-4453
International dial-in number: 1-201-389-0920

The conference call will be broadcast live and available for replay here and via the Investors section of the Landsea Homes website at https://ir.landseahomes.com/.

A replay of the conference call will be available after 1:00 p.m. Eastern time on the same day through the same time on August 15, 2023.

Replay Details:

Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13740019

About Landsea Homes

Landsea Homes Corporation (Nasdaq: LSEA) is a publicly traded residential homebuilder based in Dallas, Texas that designs and builds best-in-class homes and sustainable master-planned communities in some of the nation's most desirable markets. The company has developed homes and communities in New York, Boston, New Jersey, Arizona, Florida, Texas and throughout California in Silicon Valley, Los Angeles and Orange County. Landsea Homes was named the 2022 winner of the prestigious Builder of the Year award, presented by BUILDER magazine, in recognition of a historical year of transformation.

An award-winning homebuilder that builds suburban, single-family detached and attached homes, mid-and high-rise properties, and master-planned communities, Landsea Homes is known for creating inspired places that reflect modern living and provides homebuyers the opportunity to "Live in Your Element." Our homes allow people to live where they want to live, how they want to live – in a home created especially for them.

Driven by a pioneering commitment to sustainability, Landsea Homes' High Performance Homes are responsibly designed to take advantage of the latest innovations with home automation technology supported by Apple®. Homes include features that make life easier and provide energy savings that allow for more comfortable living at a lower cost through sustainability features that contribute to healthier living for both homeowners and the planet.

Led by a veteran team of industry professionals who boast years of worldwide experience and deep local expertise, Landsea Homes is committed to positively enhancing the lives of our homebuyers, employees and stakeholders by creating an unparalleled lifestyle experience that is unmatched.

For more information on Landsea Homes, visit: www.landseahomes.com.

Forward-Looking Statements

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws, including, but not limited to, our expectations for future financial performance, business strategies or expectations for our business. These statements constitute projections, forecasts, and forward-looking statements, and are not guarantees of performance. Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Words such as “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” “look” or similar expressions may identify forward-looking statements. Specifically, forward-looking statements may include statements relating to the future financial performance of Landsea Homes; changes in the market for Landsea Homes’ products and services; and other expansion plans and opportunities.

These forward-looking statements are based on information available as of the date of this press release and our management’s current expectations, forecasts, and assumptions, and involve a number of judgments, risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

These risks and uncertainties include, but are not limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission (“SEC”). These risk factors and those identified elsewhere in this press release, among others, could cause actual results to differ materially from historical performance and include, but are not limited to:

the cyclical nature of our industry and the possibility that adverse changes in general and local economic conditions could reduce the demand for homes;
our ability to develop communities successfully and in a timely manner;
changes in the terms and availability of mortgage financing, interest rates, federal lending programs, and tax laws, affecting the demand for and the ability of our homebuyers to complete the purchase of a home;
our geographic concentration, which could materially and adversely affect us if the homebuilding industry in our current markets should experience a decline;
the potential for adverse weather and geological conditions to increase costs, cause project delays or reduce consumer demand for housing;
our ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial and investment conditions, and the risk that we may be forced to hold non-income producing properties for extended periods of time;
our reliance on third-party skilled labor, suppliers and long supply chains;
the dependence of our long-term sustainability and growth upon our ability to acquire lots that are either developed or have the approvals necessary for us to develop them; and
the other risks and uncertainties indicated in Landsea Homes’ SEC reports or documents filed or to be filed with the SEC by Landsea Homes.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Investor Relations Contact:
Drew Mackintosh
Mackintosh Investor Relations, LLC
drew@mackintoshir.com
310-924-9036

Media Contact:
Annie Noebel
Cornerstone Communications
anoebel@cornerstonecomms.com
949-449-2527

	June 30, 2023		December 31, 2022
	(dollars in thousands)
Assets
Cash and cash equivalents	$	74,186	$	123,634
Cash held in escrow		1,904		17,101
Real estate inventories		1,125,109		1,093,369
Due from affiliates		4,110		3,744
Goodwill		68,639		68,639
Other assets		132,623		134,009
Total assets	$	1,406,571	$	1,440,496

Liabilities
Accounts payable	$	72,899	$	74,445
Accrued expenses and other liabilities		138,446		149,426
Due to affiliates		884		884
Notes and other debts payable, net		482,736		505,422
Total liabilities		694,965		730,177

Commitments and contingencies

Equity
Stockholders’ equity:
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, none issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized, 41,378,576 issued and 39,183,181 outstanding as of June 30, 2023, 42,110,794 issued and 40,884,268 outstanding as of December 31, 2022		4		4
Additional paid-in capital		490,741		497,598
Retained earnings		166,513		158,348
Total stockholders’ equity		657,258		655,950
Noncontrolling interests		54,348		54,369
Total equity		711,606		710,319
Total liabilities and equity	$	1,406,571	$	1,440,496

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023		2022
	(dollars in thousands, except per share amounts)
Revenue
Home sales	$	291,512		$	350,807		$	532,137	$	648,773
Lot sales and other		1,732			17,872			2,847		36,133
Total revenues		293,244			368,679			534,984		684,906

Cost of sales
Home sales		240,835			276,156			437,889		511,858
Lot sales and other		1,748			14,438			2,461		29,809
Total cost of sales		242,583			290,594			440,350		541,667

Gross margin
Home sales		50,677			74,651			94,248		136,915
Lot sales and other		(16	)		3,434			386		6,324
Total gross margin		50,661			78,085			94,634		143,239

Sales and marketing expenses		18,334			24,155			34,742		43,303
General and administrative expenses		25,980			27,037			48,760		49,623
Total operating expenses		44,314			51,192			83,502		92,926

Income from operations		6,347			26,893			11,132		50,313

Other income (loss), net		1,159			(1,907	)		2,114		(1,644	)
Loss on remeasurement of warrant liability		—			(1,760	)		—		(7,315	)
Pretax income		7,506			23,226			13,246		41,354

Provision for income taxes		1,640			8,372			3,257		13,439

Net income		5,866			14,854			9,989		27,915
Net income (loss) attributable to noncontrolling interests		919			(81	)		1,824		(85	)
Net income attributable to Landsea Homes Corporation	$	4,947		$	14,935		$	8,165	$	28,000

Income per share:
Basic	$	0.12		$	0.34		$	0.20	$	0.62
Diluted	$	0.12		$	0.34		$	0.20	$	0.62

Weighted average common shares outstanding:
Basic		39,891,982			43,081,762			39,944,549		44,208,307
Diluted		39,971,731			43,200,467			40,059,731		44,383,407

Home Deliveries and Home Sales Revenue

	Three Months Ended June 30,
	2023					2022					% Change
	Homes	Dollar Value		ASP		Homes	Dollar Value		ASP		Homes		Dollar Value		ASP
	(dollars in thousands)
Arizona	160	$	70,590	$	441	154	$	69,176	$	449	4	%	2	%	(2	)%
California	115		99,516		865	133		107,687		810	(14)%		(8	)%	7	%
Florida	264		121,406		460	252		109,084		433	5	%	11	%	6	%
Metro New York	—		—	N/A		28		59,926		2,140	N/A		N/A		N/A
Texas	—		—	N/A		5		4,934		987	N/A		N/A		N/A
Total	539	$	291,512	$	541	572	$	350,807	$	613	(6)%		(17	)%	(12	)%

	Six Months Ended June 30,
	2023					2022					% Change
	Homes	Dollar Value		ASP		Homes	Dollar Value		ASP		Homes		Dollar Value		ASP
	(dollars in thousands)
Arizona	330	$	143,124	$	434	297	$	131,191	$	442	11	%	9	%	(2	)%
California	200		166,774		834	261		223,239		855	(23	)%	(25	)%	(2	)%
Florida	476		216,396		455	523		215,625		412	(9	)%	—	%	10	%
Metro New York	1		1,649		1,649	32		67,626		2,113	(97	)%	(98	)%	(22	)%
Texas	4		4,194		1,049	11		11,092		1,008	(64	)%	(62	)%	4	%
Total	1,011	$	532,137	$	526	1,124	$	648,773	$	577	(10	)%	(18	)%	(9	)%

Net New Home Orders, Dollar Value of Orders, and Monthly Absorption Rates

	Three Months Ended June 30,
	2023						2022						% Change
	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes		Dollar Value		ASP		Monthly Absorption Rate
	(dollars in thousands)
Arizona	186	$	79,263	$	426	3.6	133	$	64,962	$	488	3.4	40	%	22	%	(13	%)	6	%
California	216		181,466		840	5.9	115		112,070		975	3.5	88	%	62	%	(14	%)	69	%
Florida	163		63,686		391	1.9	287		139,692		487	3.6	(43	)%	(54	)%	(20	%)	(47	)%
Metro New York⁽¹⁾	—		—	N/A		—	—		2,874	N/A		—	N/A		N/A		N/A		N/A
Texas	—		—	N/A		—	3		2,914		971	0.5	N/A		N/A		N/A		N/A
Total	565		324,415	$	574	3.3	538		322,512	$	599	3.3	5	%	1	%	(4	)%	—	%

^{(1) During the three months ended June 30, 2022, the Metro New York segment had one cancellation and one sale.}

	Six Months Ended June 30,
	2023						2022						% Change
	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes	Dollar Value		ASP		Monthly Absorption Rate	Homes		Dollar Value		ASP		Monthly Absorption Rate
	(dollars in thousands)
Arizona	338	$	142,008	$	420	3.4	272	$	139,023	$	511	3.9	24	%	2	%	(18	)%	(13	)%
California	380		317,693		836	5.3	289		274,245		949	4.3	31	%	16	%	(12	)%	23	%
Florida	341		143,024		419	2.0	594		279,056		470	3.6	(43	)%	(49	)%	(11	)%	(44	)%
Metro New York	—		—	N/A		—	13		37,190		2,861	2.2	N/A		N/A		N/A		N/A
Texas	4		4,194		1,049	1.3	7		7,096		1,014	0.5	(43	)%	(41	)%	3	%	160	%
Total	1,063	$	606,919	$	571	3.1	1,175	$	736,610	$	627	3.6	(10	)%	(18	)%	(9	)%	(14	)%

Average Selling Communities

	Three Months Ended June 30,				Six Months Ended June 30,
	2023	2022	% Change		2023	2022	% Change
Arizona	17.0	13.0	31	%	16.5	11.5	43	%
California	12.3	11.0	12	%	12.0	11.3	6	%
Florida	28.0	26.7	5	%	28.8	27.7	4	%
Metro New York	—	1.0	(100	)%	—	1.0	(100	)%
Texas	—	2.0	(100	)%	0.5	2.5	(80	)%
Total	57.3	53.7	7	%	57.8	54.0	7	%

Backlog

	June 30, 2023					June 30, 2022					% Change
	Homes	Dollar Value		ASP		Homes	Dollar Value		ASP		Homes		Dollar Value		ASP
	(dollars in thousands)
Arizona	113	$	48,871	$	432	397	$	189,064	$	476	(72	)%	(74	)%	(9	)%
California	259		229,365		886	284		277,382		977	(9	)%	(17	)%	(9	)%
Florida	350		177,525		507	876		407,066		465	(60	)%	(56	)%	9	%
Metro New York	—		—	N/A		6		20,251		3,375	N/A		N/A		N/A
Texas	—		—	N/A		8		8,352		1,044	N/A		N/A		N/A
Total	722	$	455,761	$	631	1,571	$	902,115	$	574	(54	)%	(49	)%	10	%

Lots Owned or Controlled

	June 30, 2023			June 30, 2022
	Lots Owned	Lots Controlled	Total	Lots Owned	Lots Controlled	Total	% Change
Arizona	2,040	1,389	3,429	2,362	2,285	4,647	(26	)%
California	574	1,708	2,282	684	2,078	2,762	(17	)%
Florida	2,366	1,687	4,053	1,690	2,954	4,644	(13	)%
Metro New York	2	—	2	18	—	18	(89	)%
Texas	38	1,204	1,242	28	918	946	31	%
Total	5,020	5,988	11,008	4,782	8,235	13,017	(15	)%

Home Sales Gross Margins

Home sales gross margin measures the price achieved on delivered homes compared to the costs needed to build the home. In the following table, we calculate gross margins adjusting for interest in cost of sales, inventory impairments, and purchase price accounting for acquired work in process inventory. This non-GAAP financial measure should not be used as a substitute for the Company's operating results in accordance with GAAP. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. We believe the below information is meaningful as it isolates the impact that indebtedness, impairments, and acquisitions have on our gross margins and allows for comparability to previous periods and competitors.

	Three Months Ended June 30,
		2023	%			2022	%
	(dollars in thousands)
Home sales revenue	$	291,512	100.0	%	$	350,807	100.0	%
Cost of home sales		240,835	82.6	%		276,156	78.7	%
Home sales gross margin		50,677	17.4	%		74,651	21.3	%
Add: Interest in cost of home sales		7,276	2.5	%		14,704	4.2	%
Add: Real estate inventories impairment		4,700	1.6	%		—	—	%
Adjusted home sales gross margin excluding interest and real estate inventories impairment		62,653	21.5	%		89,355	25.5	%
Add: Purchase price accounting for acquired inventory		5,710	2.0	%		12,812	3.7	%
Adjusted home sales gross margin excluding interest, real estate inventories impairment, and purchase price accounting for acquired inventory	$	68,363	23.5	%	$	102,167	29.1	%

	Six Months Ended June 30,
		2023	%			2022	%
	(dollars in thousands)
Home sales revenue	$	532,137	100.0	%	$	648,773	100.0	%
Cost of home sales		437,889	82.3	%		511,858	78.9	%
Home sales gross margin		94,248	17.7	%		136,915	21.1	%
Add: Interest in cost of home sales		11,818	2.2	%		21,086	3.3	%
Add: Real estate inventories impairment		4,700	0.9	%		—	—	%
Adjusted home sales gross margin excluding interest and real estate inventories impairment		110,766	20.8	%		158,001	24.4	%
Add: Purchase price accounting for acquired inventory		10,195	1.9	%		30,550	4.7	%
Adjusted home sales gross margin excluding interest, real estate inventories impairment, and purchase price accounting for acquired inventory	$	120,961	22.7	%	$	188,551	29.1	%

EBITDA and Adjusted EBITDA

The following table presents EBITDA and Adjusted EBITDA for the three months ended June 30, 2023 and 2022. Adjusted EBITDA is a non-GAAP financial measure used by management in evaluating operating performance. We define Adjusted EBITDA as net income before (i) income tax expense (benefit), (ii) interest expenses, (iii) depreciation and amortization, (iv) inventory impairments, (v) purchase accounting adjustments for acquired work in process inventory related to business combinations, (vi) loss (gain) on debt extinguishment or forgiveness, (vii) transaction costs related to the Merger and business combinations, (viii) write-off of deferred offering costs, (ix) abandoned projects costs, (x) the impact of income or loss allocations from our unconsolidated joint ventures, and (xi) loss on remeasurement of warrant liability. We believe Adjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest, effective tax rates, levels of depreciation and amortization, and items considered to be non-recurring. The economic activity related to our unconsolidated joint ventures is not core to our operations and is the reason we have excluded those amounts. Accordingly, we believe this measure is useful for comparing our core operating performance from period to period. Our presentation of Adjusted EBITDA should not be considered as an indication that our future results will be unaffected by unusual or non-recurring items.

	Three Months Ended June 30,
		2023		2022
	(dollars in thousands)
Net income	$	5,866	$	14,854
Provision for income taxes		1,640		8,372
Interest in cost of sales		7,319		14,737
Interest relieved to equity in net income of unconsolidated joint ventures		—		35
Depreciation and amortization expense		1,139		1,440
EBITDA		15,964		39,438
Real estate inventories impairment		4,700		—
Purchase price accounting in cost of home sales		5,710		12,812
Transaction costs		18		257
Write-off of offering costs		436		—
Abandoned project costs		197		—
Equity in net income of unconsolidated joint ventures, excluding interest relieved		—		(105	)
Loss on debt extinguishment or forgiveness		—		2,476
Loss on remeasurement of warrant liability		—		1,760
Adjusted EBITDA	$	27,025	$	56,638

	Six Months Ended June 30,
		2023		2022
	(dollars in thousands)
Net income	$	9,989	$	27,915
Provision for income taxes		3,257		13,439
Interest in cost of sales		11,872		21,126
Interest relieved to equity in net income of unconsolidated joint ventures		—		70
Depreciation and amortization expense		2,557		3,063
EBITDA		27,675		65,613
Real estate inventories impairment		4,700		—
Purchase price accounting in cost of home sales		10,195		30,550
Transaction costs		33		1,205
Write-off of offering costs		436		—
Abandoned project costs		312		—
Equity in net income of unconsolidated joint ventures, excluding interest relieved		—		(139	)
Loss on debt extinguishment or forgiveness		—		2,496
Loss on remeasurement of warrant liability		—		7,315
Adjusted EBITDA	$	43,351	$	107,040

Adjusted Net Income

Adjusted Net Income attributable to Landsea Homes is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating and understanding our operating results without the effect of certain expenses that were historically pushed down by our parent company and other non-recurring items. We believe excluding these items provides a more comparable assessment of our financial results from period to period. Adjusted Net Income attributable to Landsea Homes is calculated by excluding the effects of related party interest that was pushed down by our parent company, purchase accounting adjustments for acquired work in process inventory related to business combinations, the impact from our unconsolidated joint ventures, Merger related transaction costs, loss (gain) on debt extinguishment or forgiveness, inventory impairment, and loss on remeasurement of warrant liability, and tax-effected using a blended statutory tax rate. The economic activity related to our unconsolidated joint ventures is not core to our operations and is the reason we have excluded those amounts. We also adjust for the expense of related party interest pushed down from our parent company as we have no obligation to repay the debt and related interest.

	Three Months Ended June 30,
		2023		2022
	(dollars in thousands, except share and per share amounts)
Net income attributable to Landsea Homes Corporation	$	4,947	$	14,935

Real estate inventories impairment		4,700		—
Pre-Merger capitalized related party interest included in cost of sales		545		1,600
Equity in net income of unconsolidated joint ventures		—		(70	)
Purchase price accounting for acquired inventory		5,710		12,812
Loss on debt extinguishment or forgiveness		—		2,476
Loss on remeasurement of warrant liability		—		1,760
Total adjustments		10,955		18,578
Tax-effected adjustments ⁽¹⁾		8,075		16,566

Adjusted net income attributable to Landsea Homes Corporation	$	13,022	$	31,501


Net income attributable to Landsea Homes Corporation	$	4,947	$	14,935
Less: undistributed earnings allocated to participating shares		—		(339	)
Net income attributable to common stockholders	$	4,947	$	14,596

Adjusted net income attributable to Landsea Homes Corporation	$	13,022	$	31,501
Less: adjusted undistributed earnings allocated to participating shares		—		(715	)
Adjusted net income attributable to common stockholders	$	13,022	$	30,786

Earnings per share
Basic	$	0.12	$	0.34
Diluted	$	0.12	$	0.34

Adjusted earnings per share
Basic	$	0.33	$	0.71
Diluted	$	0.33	$	0.71

Weighted average common shares outstanding used in EPS - basic		39,891,982		43,081,762
Weighted average common shares outstanding used in EPS - diluted		39,971,731		43,200,467

^{(1) Our tax-effected adjustments are based on our federal rate and a blended state rate adjusted for certain discrete items.}

	Six Months Ended June 30,
		2023		2022
	(dollars in thousands, except share and per share amounts)
Net income attributable to Landsea Homes Corporation	$	8,165	$	28,000

Real estate inventories impairment		4,700		—
Pre-Merger capitalized related party interest included in cost of sales		1,263		3,117
Equity in net income of unconsolidated joint ventures		—		(69	)
Purchase price accounting for acquired inventory		10,195		30,550
Loss on debt extinguishment or forgiveness		—		2,496
Loss on remeasurement of warrant liability		—		7,315
Total adjustments		16,158		43,409
Tax-effected adjustments ⁽¹⁾		11,910		36,272

Adjusted net income attributable to Landsea Homes Corporation	$	20,075	$	64,272


Net income attributable to Landsea Homes Corporation	$	8,165	$	28,000
Less: undistributed earnings allocated to participating shares		—		(619	)
Net income attributable to common stockholders	$	8,165	$	27,381

Adjusted net income attributable to Landsea Homes Corporation	$	20,075	$	64,272
Less: adjusted undistributed earnings allocated to participating shares		—		(1,420	)
Adjusted net income attributable to common stockholders	$	20,075	$	62,852

Earnings per share
Basic	$	0.20	$	0.62
Diluted	$	0.20	$	0.62

Adjusted earnings per share
Basic	$	0.50	$	1.42
Diluted	$	0.50	$	1.42

Weighted shares outstanding
Weighted average common shares outstanding used in EPS - basic		39,944,549		44,208,307
Weighted average common shares outstanding used in EPS - diluted		40,059,731		44,383,407

(1) Our tax-effected adjustments are based on our federal rate and a blended state rate adjusted for certain discrete items.

Net Debt to Total Capital

The following table presents the ratio of debt to capital as well as the ratio of net debt to total capital which is a non-GAAP financial measure. The ratio of debt to capital is computed as the quotient obtained by dividing total debt, net of issuance costs, by total capital (sum of total debt, net of issuance costs, plus total equity).

The non-GAAP ratio of net debt to total capital is computed as the quotient obtained by dividing net debt (which is total debt, net of issuance costs, less cash, cash equivalents, and restricted cash as well as cash held in escrow to the extent necessary to reduce the debt balance to zero) by total capital. The most comparable GAAP financial measure is the ratio of debt to capital. We believe the ratio of net debt to total 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 believe that by deducting our cash from our debt, we provide a measure of our indebtedness that takes into account our cash liquidity. We believe this provides useful information as the ratio of debt to capital does not take into account our liquidity and we believe that the ratio of net debt to total capital provides supplemental information by which our financial position may be considered.

See table below reconciling this non-GAAP measure to the ratio of debt to capital.

	June 30, 2023			December 31, 2022
	(dollars in thousands)
Total notes and other debts payable, net	$	482,736		$	505,422
Total equity		711,606			710,319
Total capital	$	1,194,342		$	1,215,741
Ratio of debt to capital		40.4	%		41.6	%

Total notes and other debts payable, net	$	482,736		$	505,422
Less: cash, cash equivalents, and restricted cash		74,186			123,634
Less: cash held in escrow		1,904			17,101
Net debt		406,646			364,687

Total capital	$	1,194,342		$	1,215,741
Ratio of net debt to total capital		34.0	%		30.0	%

Source: Landsea Homes

Released August 1, 2023

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