Landsea Homes Reports Third Quarter 2022 Results

Download as PDF

Related Documents

Third Quarter 2022 Highlights

  • Home sales revenue increased 56.3% to $326 million
  • Third quarter net income of $20.0 million, or $0.49 per diluted share
  • Total homes delivered increased 43% to 543 homes
  • Quarter-end homes in backlog increased 18% to 1,285 for a total of $741.1 million
  • Home sales gross margin expanded 480 basis points to 20.9%

NEWPORT BEACH, Calif., Nov. 03, 2022 (GLOBE NEWSWIRE) -- Landsea Homes Corporation (Nasdaq: LSEA) (“Landsea Homes” or the “Company”), a publicly traded homebuilder, reported financial results for the third quarter ended September 30, 2022. For the quarter, the Company reported pretax net income of $25.3 million, and net income of $20.0 million, or $0.49 per share. Prior year reported pretax net income was $13.8 million with net income of $10.8 million, or $0.23 per share. Adjusted net income (a non-GAAP measure) was $27.6 million or $0.69 per share. For the prior year period adjusted net income was $8.2 million, or $0.18 per share.

Management Commentary

“Landsea Homes posted strong year-over-year top and bottom-line growth in the third quarter of 2022, as home sales revenue increased 56% to $326 million and earnings grew 130% to $0.49 per diluted share,” said John Ho, Chief Executive Officer of Landsea Homes. “We also continued to make progress on the margin front generating a 480 basis-point improvement to our home sales gross margin, which came in at 20.9%. Our teams did an excellent job overcoming operational obstacles and supply chain issues in the quarter, particularly our Florida division, where we experienced closing delays but no major property damage due to Hurricane Ian.”

Mr. Ho continued, “As has been widely reported, new home sales activity slowed in the third quarter, as the combination of higher interest rates and negative buyer psychology weighed on demand. These factors also led to an increase in cancellation activity in our backlog, resulting in a cancellation rate of 9% of beginning backlog for the quarter. We are proactively adjusting our sales efforts to spur demand but expect the landscape to remain uncertain until there is more clarity on the interest rate outlook.”

Mr. Ho concluded, “Despite these near-term headwinds, we remain optimistic about the long-term outlook for our industry and our company. Existing home inventory remains scarce in our markets, and we believe that we have positioned our company in markets with great long-term housing fundamentals that are expected to experience outsized job and population growth. These factors, combined with our attractive product profile, solid balance sheet and operational discipline, give us confidence in the future of Landsea Homes.”

Operating Results

Total revenue increased 57% to $335.6 million compared to $214.1 million in the third quarter of 2021 primarily driven by increases in average sales price across our divisions, increased performance from our Florida division, and the delivery of units from our New York operations.

Total homes delivered increased 43% to 543 homes at an average sales price of $601,000 compared to 380 homes delivered at an average sales price of $550,000 in the third quarter of 2021. The increase in deliveries was attributable to the larger contribution of our Florida operations, coupled with deliveries from New York.

Net new home orders were 257 homes with a dollar value of $165.5 million, an average sales price of $644,000 and a monthly absorption rate of 1.5 sales per active community. This compares to 275 homes with a dollar value of $184.9 million, an average sales price of $673,000 and a monthly absorption rate of 2.6 sales per active community in the prior year period. The decrease in new home orders was due to slowing demand related to the significant increase in interest rates which have created uncertainty with homebuyers and impacted affordability.

Total homes in backlog increased 18% to 1,285 homes with a dollar value of $741.1 million and an average sales price of $577,000 at September 30, 2022. This compares to 1,092 homes with a dollar value of $606.2 million and an average sales price of $555,000 at September 30, 2021. The increase in units and value is due to acquired inventory from our homebuilder acquisition in January. Average sales prices in backlog increased for all of our divisions, reflecting price appreciation from earlier in the year.

Total lots owned or controlled at September 30, 2022, increased 27% to 12,410 compared to 9,756 at September 30, 2021, primarily due to the acquisition of Hanover Family Builders and additional lots under control in Texas. Additionally, we have accelerated our asset-light strategy and now control 57% of our lots compared to 43% owned.

Home sales gross margin increased to 20.9% from 16.1% in the prior year period. Adjusted home sales gross margin (a non-GAAP measure) increased to 27.2% compared to 21.4% in the prior year period. The lift was primarily due to price appreciation and an increase in gross margins within our California and Florida segments.

Net income attributable to Landsea Homes increased to $20.0 million compared to $10.8 million in the prior year period. Adjusted net income attributable to Landsea Homes (a non-GAAP measure) increased to $27.6 million compared to $8.2 million in the prior year period. Net income per share on a fully diluted basis increased to $0.49 compared to $0.23 in the third quarter of 2021. Adjusted net income per share (a non-GAAP measure) on a fully diluted basis increased to $0.69 compared to $0.18 in the third quarter of 2021.

Adjusted EBITDA (a non-GAAP measure) increased to $47.4 million compared to $19.3 million in the prior year period.

Balance Sheet

As of September 30, 2022, the Company had total liquidity of $198.1 million consisting of cash and cash equivalents and cash held in escrow of $117.4 million and $60.7 million in availability under the Company’s $675 million unsecured revolving credit facility. Total debt was $585.1 million compared to $461.1 million at December 31, 2021.

Landsea Homes’ ratio of debt to capital was 46.1% at September 30, 2022 and the Company’s net debt to net book capitalization (a non-GAAP measure) was 40.6% at September 30, 2022.

2022 Outlook

Fourth quarter 2022

  • New home deliveries anticipated to be in a range of 750 to 800
  • Delivery ASPs expected to be in a range of $560,000 to $580,000
  • Home sales gross margin to be approximately 20% on a GAAP basis, or 26% to 27% on an adjusted basis.

Conference Call

The Company will hold a conference call today at 7:00 a.m. Pacific Time (10:00 a.m. Eastern time) to discuss its third quarter 2022 results.

  • Toll-free dial-in number: 1-888-999-3182
  • International dial-in number: 1-848-280-6330

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 November 17, 2022.

Replay Details:

  • Toll-free replay number: 1-844-512-2921
  • International replay number: 1-412-317-6671
  • Replay ID: 11152571

About Landsea Homes

Landsea Homes Corporation (Nasdaq: LSEA) is a publicly traded residential homebuilder based in Newport Beach, CA 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, including as they relate to anticipated effects of the business combination with LF Capital Acquisition Corporation on January 7, 2021 (the “Business Combination”). 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 benefits of the Business Combination and the acquisitions of Vintage Estate and Hanover (the “Acquisitions”);
  • the future financial performance of the Company;
  • 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 not are 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 ability to recognize the anticipated benefits of the Acquisitions, which may be affected by, among other things, competition, the ability to integrate the combined businesses and the acquired business, and the ability of the combined business and the acquired business to grow and manage growth profitably;
  • costs related to continuing as a public company;
  • the ability to maintain the listing of Landsea Homes’ securities on Nasdaq;
  • the outcome of any legal proceedings that may be instituted against the Company;
  • changes in applicable laws or regulations;
  • the inability to launch new Landsea Homes products or services or to profitably expand into new markets;
  • the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors;
  • risks and uncertainties relating to the material weaknesses in our internal controls over financial reporting;
  • the possibility that additional information may arise that would require us to make further adjustments or revisions to our historical financial statements, report additional material weaknesses or delay the filing of our current financial statements; and
  • 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

Landsea Homes Corporation
Consolidated Balance Sheets - Unaudited

  September 30, 2022   December 31, 2021
  (dollars in thousands)
Assets      
Cash and cash equivalents $ 110,192   $ 342,810
Cash held in escrow   7,190     4,079
Restricted cash   —     443
Real estate inventories   1,179,418     844,792
Due from affiliates   5,180     4,465
Investment in and advances to unconsolidated joint ventures   —     470
Goodwill   68,639     24,457
Other assets   98,239     43,998
Total assets $ 1,468,858   $ 1,265,514
       
Liabilities      
Accounts payable $ 82,347   $ 73,734
Accrued expenses and other liabilities   114,836     97,724
Due to affiliates   2,357     2,357
Warrant liability   —     9,185
Notes and other debts payable, net   585,065     461,117
Total liabilities   784,605     644,117
       
Commitments and contingencies      
       
Equity      
Stockholders' equity:      
Preferred stock, $0.0001 par value, 50,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021, respectively   —     —
Common stock, $0.0001 par value, 500,000,000 shares authorized, 42,110,794 issued and 40,950,043 outstanding as of September 30, 2022, 46,281,091 issued and outstanding as of December 31, 2021   4     5
Additional paid-in capital   497,078     535,345
Retained earnings   132,767     84,797
Total stockholders' equity   629,849     620,147
Noncontrolling interests   54,404     1,250
Total equity   684,253     621,397
Total liabilities and equity $ 1,468,858   $ 1,265,514
           

Landsea Homes Corporation
Consolidated Statements of Operations - Unaudited

  Three Months Ended September 30,   Nine Months Ended September 30,
    2022       2021       2022       2021  
  (dollars in thousands, except per share amounts)
Revenue              
Home sales $ 326,496     $ 208,916     $ 975,269     $ 603,281  
Lot sales and other   9,089       5,213       45,222       21,541  
Total revenues   335,585       214,129       1,020,491       624,822  
               
Cost of sales              
Home sales   258,362       175,349       770,220       511,177  
Lot sales and other   10,737       3,419       40,546       16,929  
Total cost of sales   269,099       178,768       810,766       528,106  
               
Gross margin              
Home sales   68,134       33,567       205,049       92,104  
Lot sales and other   (1,648 )     1,794       4,676       4,612  
Total gross margin   66,486       35,361       209,725       96,716  
               
Sales and marketing expenses   21,063       12,299       64,366       34,880  
General and administrative expenses   21,111       16,905       70,734       45,826  
Total operating expenses   42,174       29,204       135,100       80,706  
               
Income from operations   24,312       6,157       74,625       16,010  
               
Other income (expense), net   920       394       (793 )     3,927  
Equity in net income of unconsolidated joint ventures   70       168       139       814  
Gain (loss) on remeasurement of warrant liability   —       7,040       (7,315 )     (3,245 )
Pretax income   25,302       13,759       66,656       17,506  
               
Provision for income taxes   4,021       2,977       17,460       3,160  
               
Net income   21,281       10,782       49,196       14,346  
Net income (loss) attributable to noncontrolling interests   1,311       (15 )     1,226       (41 )
Net income attributable to Landsea Homes Corporation $ 19,970     $ 10,797     $ 47,970     $ 14,387  
               
Income per share:              
Basic $ 0.49     $ 0.23     $ 1.10     $ 0.31  
Diluted $ 0.49     $ 0.23     $ 1.09     $ 0.31  
               
Weighted average common shares outstanding:              
Basic   39,935,152       45,281,091       42,768,269       45,077,015  
Diluted   40,097,269       45,329,891       42,943,871       45,146,552  
                               

Home Deliveries and Home Sales Revenue

  Three Months Ended September 30,
  2022   2021   % Change
  Homes   Dollar Value   ASP   Homes   Dollar Value   ASP   Homes   Dollar Value   ASP
  (dollars in thousands)
Arizona 154   $ 69,690   $ 453   171   $ 63,464   $ 371   (10 )%   10 %   22 %
California 128     118,978     930   121     110,046     909   6 %   8 %   2 %
Florida 243     103,086     424   81     30,306     374   200 %   240 %   13 %
Metro New York 11     28,132     2,557   —     —     —   N/A   N/A   N/A
Texas 7     6,610     944   7     5,100     729   — %   30 %   29 %
Total 543   $ 326,496   $ 601   380   $ 208,916   $ 550   43 %   56 %   9 %


  Nine Months Ended September 30,
  2022   2021   % Change
  Homes   Dollar Value   ASP   Homes   Dollar Value   ASP   Homes   Dollar Value   ASP
  (dollars in thousands)
Arizona 451   $ 200,881   $ 445   560   $ 192,808   $ 344   (19 )%   4 %   29 %
California 389     342,217     880   384     346,680     903   1 %   (1 )%   (3 )%
Florida 766     318,711     416   152     55,406     365   404 %   475 %   14 %
Metro New York 43     95,758     2,227   —     —   N/A   N/A   N/A   N/A
Texas 18     17,702     983   10     8,387     839   80 %   111 %   17 %
Total 1,667   $ 975,269   $ 585   1,106   $ 603,281   $ 545   51 %   62 %   7 %
                                                 

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

  Three Months Ended September 30,
  2022   2021     % 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 38 $ 15,397 $ 405 0.8   98   $ 47,922 $ 489 2.5     (61 )% (68 )% (17 %) (68 )%
California 68   56,460   830 1.8   142     107,442   757 4.6     (52 )% (47 )% 10 % (61 )%
Florida 134   70,973   530 1.8   29     13,869   478 1.1     362 % 412 % 11 % 64 %
Metro New York 7   13,472   1,925 2.3   8     13,220   1,653 2.7     (13 )% 2 % 16 % (15 )%
Texas(1) 10   9,172   917 1.7   (2 )   2,487 N/A (0.4 )   (600 )% 269 % — % (525 )%
Total 257   165,474 $ 644 1.5   275     184,940 $ 673 2.6     (7 )% (11 )% (4 )% (42 )%


(1) The ASP calculation for our Texas segment for the three months ended September 30, 2021 is not a meaningful disclosure due to cancellations exceeding sales as contracts are renegotiated. Our three new sales contracts during the three months ended September 30, 2021 had an ASP of $1,088 thousand.
   


  Nine Months Ended September 30,
  2022   2021     % 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 310 $ 154,420 $ 498 2.6   531   $ 213,907   $ 403 4.4     (42 )% (28 )% 24 % (41 )%
California 357   330,705   926 3.4   422     379,979     900 4.2     (15 )% (13 )% 3 % (19 )%
Florida 728   350,029   481 3.0   76     35,556     468 1.6     858 % 884 % 3 % 88 %
Metro New York 20   50,662   2,533 2.2   13     26,518     2,040 2.4     54 % 91 % 24 % (8 )%
Texas(1)(2) 17   16,268   957 0.8   (11 )   (5,584 ) N/A (1.6 )   (255 )% (391 )% N/A (150 )%
Total 1,432 $ 902,084 $ 630 2.9   1,031   $ 650,376   $ 631 3.7     39 % 39 % — % (22 )%


(1) Monthly absorption rates for Florida and Texas in 2021 are based on five months, for the time subsequent to the acquisition of Vintage Estate Homes in May 2021.
(2) The ASP calculation for our Texas segment for the nine months ended September 30, 2021 is not a meaningful disclosure due to cancellations exceeding sales as contracts are renegotiated. Our three new sales contracts during the nine months ended September 30, 2021 had an ASP of $1,088 thousand.
   

Average Selling Communities

  Three Months Ended September 30,   Nine Months Ended September 30,
  2022 2021 % Change   2022 2021 % Change
Arizona 16.3 13.3 23 %   13.1 13.3 (2 )%
California 12.3 10.3 19 %   11.7 11.1 5 %
Florida(1) 25.3 9.0 181 %   26.9 9.6 180 %
Metro New York 1.0 1.0 — %   1.0 0.6 67 %
Texas(1) 2.0 1.7 18 %   2.3 1.4 64 %
Total 57.0 35.3 61 %   55.0 31.1 77 %


(1) Average selling communities calculations for Florida and Texas for the nine months ended September 2021 are based on five months, for the time subsequent to the acquisition of Vintage Estate Homes in May 2021.
   

Backlog

  September 30, 2022   September 30, 2021   % Change
  Homes   Dollar Value   ASP   Homes   Dollar Value   ASP   Homes   Dollar Value   ASP
  (dollars in thousands)
Arizona 281   $ 134,771   $ 480   479   $ 194,031   $ 405   (41 )%   (31 )%   19 %
California 224     214,864     959   280     249,709     892   (20 )%   (14 )%   8 %
Florida(1) 767     374,953     489   301     118,632     394   155 %   216 %   24 %
Metro New York 2     5,591     2,796   13     26,518     2,040   (85 )%   (79 )%   37 %
Texas 11     10,914     992   19     17,347     913   (42 )%   (37 )%   9 %
Total 1,285   $ 741,093   $ 577   1,092   $ 606,237   $ 555   18 %   22 %   4 %


(1) Backlog acquired in Florida at the date of the Hanover acquisition was 522 homes with a value of $228,097 thousand.
   

Lots Owned or Controlled

  September 30, 2022   September 30, 2021    
  Lots Owned   Lots Controlled   Total   Lots Owned   Lots Controlled   Total   % Change
Arizona 2,302   2,191   4,493   3,842   1,246   5,088   (12 )%
California 628   1,948   2,576   1,005   1,137   2,142   20 %
Florida 2,420   1,978   4,398   806   697   1,503   193 %
Metro New York 7   —   7   50   —   50   (86 )%
Texas 18   918   936   55   918   973   (4 )%
Total 5,375   7,035   12,410   5,758   3,998   9,756   27 %
                             

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 (if applicable), and purchase price accounting for acquired work in process inventory (if applicable). 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 this non-GAAP measure is meaningful because it provides insight into the impact that financing arrangements and acquisitions have on our homebuilding gross margin and allows for comparability of our gross margins to competitors that present similar information.

  Three Months Ended September 30,
    2022   %     2021   %
  (dollars in thousands)
Home sales revenue $ 326,496   100.0 %   $ 208,916   100.0 %
Cost of home sales   258,362   79.1 %     175,349   83.9 %
Home sales gross margin   68,134   20.9 %     33,567   16.1 %
Add: Interest in cost of home sales   10,138   3.1 %     7,262   3.5 %
Add: Inventory impairments   —   — %     —   — %
Adjusted home sales gross margin excluding interest and inventory impairments   78,272   24.0 %     40,829   19.5 %
Add: Purchase price accounting for acquired inventory   10,612   3.3 %     3,840   1.8 %
Adjusted home sales gross margin excluding interest, inventory impairments, and purchase price accounting for acquired inventory $ 88,884   27.2 %   $ 44,669   21.4 %


  Nine Months Ended September 30,
    2022   %     2021   %
  (dollars in thousands)
Home sales revenue $ 975,269   100.0 %   $ 603,281   100.0 %
Cost of home sales   770,220   79.0 %     511,177   84.7 %
Home sales gross margin   205,049   21.0 %     92,104   15.3 %
Add: Interest in cost of home sales   31,224   3.2 %     25,551   4.2 %
Add: Inventory impairments   —   — %     —   — %
Adjusted home sales gross margin excluding interest and inventory impairments   236,273   24.2 %     117,655   19.5 %
Add: Purchase price accounting for acquired inventory   41,162   4.2 %     10,969   1.8 %
Adjusted home sales gross margin excluding interest, inventory impairments, and purchase price accounting for acquired inventory $ 277,435   28.4 %   $ 128,624   21.3 %
                       

EBITDA and Adjusted EBITDA

The following table presents EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2022 and 2021. 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) the impact of income or loss allocations from our unconsolidated joint ventures, and (ix) 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 September 30,
    2022       2021  
  (dollars in thousands)
Net income $ 21,281     $ 10,782  
Provision for income taxes   4,021       2,977  
Interest in cost of sales   10,150       7,282  
Interest relieved to equity in net income of unconsolidated joint ventures   —       281  
Interest expense   —       11  
Depreciation and amortization expense   1,382       1,287  
EBITDA   36,834       22,620  
Purchase price accounting in cost of home sales   10,612       3,840  
Transaction costs   —       328  
Equity in net income of unconsolidated joint ventures, excluding interest relieved   (70 )     (449 )
Loss (gain) on debt extinguishment or forgiveness   —       —  
Gain on remeasurement of warrant liability   —       (7,040 )
Adjusted EBITDA $ 47,376     $ 19,299  


  Nine Months Ended September 30,
    2022       2021  
  (dollars in thousands)
Net income $ 49,196     $ 14,346  
Provision for income taxes   17,460       3,160  
Interest in cost of sales   31,276       25,648  
Interest relieved to equity in net income of unconsolidated joint ventures   70       1,056  
Interest expense   —       32  
Depreciation and amortization expense   4,445       3,240  
EBITDA   102,447       47,482  
Purchase price accounting in cost of home sales   41,162       10,969  
Transaction costs   1,205       4,492  
Equity in net income of unconsolidated joint ventures, excluding interest relieved   (209 )     (1,870 )
Loss (gain) on debt extinguishment or forgiveness   2,496       (4,266 )
Loss on remeasurement of warrant liability   7,315       3,245  
Adjusted EBITDA $ 154,416     $ 60,052  
               

Adjusted Net Income

Adjusted Net Income 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 our operating results 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 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, loss (gain) on debt extinguishment or forgiveness, and loss on remeasurement of warrant liability, merger related transaction costs, 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 September 30,
    2022       2021  
  (dollars in thousands, except share and per share amounts)
Net income attributable to Landsea Homes Corporation $ 19,970     $ 10,797  
       
Previously capitalized related party interest included in cost of sales   714       2,571  
Equity in net income of unconsolidated joint ventures   (70 )     (168 )
Purchase price accounting for acquired inventory   10,612       3,840  
Loss (gain) on debt extinguishment or forgiveness   —       —  
Gain on remeasurement of warrant liability   —       (7,040 )
Total adjustments   11,256       (797 )
Tax-effected adjustments (1)   8,270       (2,458 )
       
Adjusted net income attributable to Landsea Homes Corporation $ 28,240     $ 8,339  
       
       
Net income attributable to Landsea Homes Corporation $ 19,970     $ 10,797  
Less: undistributed earnings allocated to participating shares   (487 )     (239 )
Net income attributable to common stockholders $ 19,483     $ 10,558  
       
Adjusted net income attributable to Landsea Homes Corporation $ 28,240     $ 8,339  
Less: adjusted undistributed earnings allocated to participating shares   (689 )     (184 )
Adjusted net income attributable to common stockholders $ 27,551     $ 8,155  
       
Earnings per share      
Basic $ 0.49     $ 0.23  
Diluted $ 0.49     $ 0.23  
       
Adjusted earnings per share      
Basic $ 0.69     $ 0.18  
Diluted $ 0.69     $ 0.18  
       
Weighted average common shares outstanding used in EPS - basic   39,935,152       45,281,091  
Weighted average common shares outstanding used in EPS - diluted   40,097,269       45,329,891  


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


  Nine Months Ended September 30,
    2022       2021  
  (dollars in thousands, except share and per share amounts)
Net income attributable to Landsea Homes Corporation $ 47,970     $ 14,387  
       
Previously capitalized related party interest included in cost of sales   3,831       9,813  
Equity in net income of unconsolidated joint ventures   (139 )     (814 )
Purchase price accounting for acquired inventory   41,162       10,969  
Merger related transaction costs   —       2,656  
Loss (gain) on debt extinguishment or forgiveness   2,496       (4,266 )
Loss on remeasurement of warrant liability   7,315       3,245  
Total adjustments   54,665       21,603  
Tax-effected adjustments (1)   44,599       15,583  
       
Adjusted net income attributable to Landsea Homes Corporation $ 92,569     $ 29,970  
       
       
Net income attributable to Landsea Homes Corporation $ 47,970     $ 14,387  
Less: undistributed earnings allocated to participating shares   (1,094 )     (315 )
Net income attributable to common stockholders $ 46,876     $ 14,072  
       
Adjusted net income attributable to Landsea Homes Corporation $ 92,569     $ 29,970  
Less: adjusted undistributed earnings allocated to participating shares   (2,111 )     (656 )
Adjusted net income attributable to common stockholders $ 90,458     $ 29,314  
       
Earnings per share      
Basic $ 1.10     $ 0.31  
Diluted $ 1.09     $ 0.31  
       
Adjusted earnings per share      
Basic $ 2.12     $ 0.65  
Diluted $ 2.11     $ 0.65  
       
Weighted shares outstanding      
Weighted average common shares outstanding used in EPS - basic   42,768,269       45,077,015  
Weighted average common shares outstanding used in EPS - diluted   42,943,871       45,146,552  


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

Net Debt to Net Capital

The following table presents the ratio of debt to capital as well as the ratio of net debt to net 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 net 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 net capital (sum of net debt plus total equity). The most comparable GAAP financial measure is the ratio of debt to capital. We believe the ratio of net debt to net 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 net 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.

  September 30, 2022   December 31, 2021
  (dollars in thousands)
Total notes and other debts payable, net $ 585,065     $ 461,117  
Total equity   684,253       621,397  
Total capital $ 1,269,318     $ 1,082,514  
Ratio of debt to capital   46.1 %     42.6 %
       
Total notes and other debts payable, net $ 585,065     $ 461,117  
Less: cash, cash equivalents, and restricted cash   110,192       343,253  
Less: cash held in escrow   7,190       4,079  
Net debt   467,683       113,785  
Total equity   684,253       621,397  
Net capital $ 1,151,936     $ 735,182  
Ratio of net debt to net capital   40.6 %     15.5 %


Primary Logo

Source: Landsea Homes

Released November 3, 2022