UCP Reports Second Quarter 2014 Results
- Net Income Improves to $1.3 Million -
- Total Revenue Increases to $63.6 Million -
- Integration of Newly Acquired Citizens Homes Assets Progressing -
Second Quarter 2014 Highlights Compared to Second Quarter 2013
- Net income of $1.3 million, compared to a net loss of $1.1 million
- Revenue from homebuilding operations increased 139.2% to $50.0 million
- New homes deliveries increased 142% from 57 units to 138 units
- Net new home orders improved 125% from 59 units to 133 units
- Consolidated gross margin of 18.8%, compared to 22.0%
- Selling, general and administrative expense as a percentage of total revenue decreased to 16.8%, compared to 26.8%.
- Land Sales of $12.1 million from 149 lots, compared to $6.8 million from 54 lots
- Lots owned and controlled of 5,695 at quarter end
- In April 2014, completed successful acquisition of Citizens Homes, Inc. (“Citizens Homes”), a privately held Southeast home builder, for approximately $14 million in cash; integration remains on track
“Our strong results are a continued reflection of the progress we are making toward our target of doubling our revenue and community count in 2014. We are pleased to report improvement in our net income as we continue to grow our operations and integrate our newly acquired Southeast assets from Citizens Homes,” stated Dustin Bogue, President and Chief Executive Officer of UCP. “We ended the quarter with an improved backlog and community count to support the ongoing execution of our growth objectives. During the quarter we also made meaningful progress on leveraging our SG&A. Looking to the second half of 2014, our markets remain dynamic, but the demand for quality homes in well located areas continues to improve overall. We also expect to opportunistically utilize our pipeline of land to support our growth in an effort to maximize value. We remain committed to improving our growth trajectory, while also enhancing our gross margin along with our SG&A leverage as we grow our business in our select West Coast and Southeast markets.”
Second Quarter 2014 Operating Results
Total consolidated revenue including both homebuilding and land development segments for the three months ended June 30, 2014 increased 129.4% to $63.6 million, as compared to $27.7 million for the three months ended June 30, 2013.
Revenue from homebuilding operations in the second quarter 2014 rose by $29.1 million, to $50.0 million, as compared to $20.9 million for the same period last year. The improvement was primarily the result of an increase of 81 in the number of homes delivered to 138 during the second quarter, as compared to 57 homes during the prior year period. The primary driver of growth in deliveries was an increase in the number of selling communities to 26 communities in the second quarter, as compared to 9 in the prior year quarter. Average selling price was approximately $362,000 during the second quarter, as compared to approximately $367,000 during the prior year quarter. The change in average selling price was primarily a result of geographic mix, including 37 homes delivered from the Citizens Homes in the Southeast with an average sales price of approximately $235,000.
Revenue from land sales for the second quarter 2014 was $12.1 million, as compared to $6.8 million in the same period in 2013. This increase was primarily the result of an additional 95 lots that were delivered during the second quarter, as compared to 54 lots during the prior year period.
Consolidated gross margins in the current quarter were 18.8% compared to 22.0% in the same period in 2013. Homebuilding gross margin during the second quarter was 17.9%, compared to 21.2% in the same period in 2013, due to an increase in buyer incentives and the impact of the Citizens Homes acquisition. Land sales gross margin was 23.5% for the current quarter as compared to 24.6% for the second quarter of 2013.
Sales and marketing expense for the current quarter was $3.8 million as compared to $2.1 million in the 2013 quarter; due to the significant increase in the number of selling communities being marketed. As a percentage of total revenue, sales and marketing expenses improved to 5.9% in the current quarter as compared to 7.6% last year, primarily as a result of a decrease in average home delivery transaction costs per home in the quarter.
General and administrative expense for the current quarter was $6.9 million as compared to $5.3 million in the 2013 quarter which was prior to our Initial Public Offering. The increase of $1.6 million is largely due to $1.1 million of stock based compensation, approximately $180,000 for professional fees related to the acquisition of Citizens Homes, and increased payroll costs associated with higher headcount. As a percentage of total revenue, general and administrative expenses improved to 10.9% for the second quarter, compared to 19.2% for the same period in 2013 as a result of higher total revenue and favorable operating leverage on the Company’s fixed cost base.
UCP’s net income for the second quarter of 2014 was $1.3 million versus a net loss of $1.1 million in the same period last year primarily attributable to higher total revenue and lower selling, general and administrative expense as a percent of sales.
Net new home orders in the quarter increased to 133 from 59 in the same period in 2013, primarily as the result of an increase in average active selling communities to 27 from 7 in the second quarter of 2013. The increase in average selling communities included 15 communities from Citizens Homes and 12 communities in the West. Unit backlog at the end of the quarter was 124 as compared to 78 at the end of prior year quarter. Backlog on a dollar basis increased by $13 million to $39.7 million and the average selling price of homes in backlog was $320,435 in the second quarter compared to $341,974 during the same period last year.
UCP increased total lots owned and controlled to 5,695 at the end of the second quarter of 2014 from 5,380 at the end of fiscal 2013. The Company continues to actively pursue opportunities to acquire land in desirable and high growth areas in its attractive markets.
In April 2014, UCP entered the Charlotte, Raleigh, Myrtle Beach and Nashville markets through its acquisition of substantially all of the assets of Citizens Homes, Inc., a privately held homebuilder with operations in those select growth markets in the Southeast. For the full year ended December 31, 2013, Citizens Homes delivered approximately 170 homes generating revenues of approximately $37.3 million. The addition of Citizens Homes assets expands UCP’s geographic presence and advances its long-term growth strategy. The purchase price was approximately $14 million in cash, and Citizens Homes is eligible to receive additional earn-out payments from UCP of up to $6 million in the aggregate based on performance over the next five years.
UCP expects to benefit from added scale, increased land holdings, exposure to the high-growth Southeast markets and Citizens Homes’ experienced team of proven operators. UCP expects the strategic acquisition will:
- Add Scale and Create Opportunities for Accelerated Growth: The acquisition of Citizens Homes’ operating platform and land portfolio is expected to materially increase UCP’s selling communities and land inventory.
- Provide Opportunity for Sales Growth and Operational Efficiency: As part of UCP, UCP believes there will be an opportunity to increase Citizens Homes’ transaction volume and increase certain operational efficiencies.
- Enhance Operations: UCP expects to benefit from the experience and relationships of Citizens Homes’ team, who have delivered many homes in Southeast markets over the past years.
Webcast and Conference Call
The Company will host a conference call for investors and other interested parties on Monday, August 11, 2014, beginning at 5:00 p.m. Eastern Time, 2:00 p.m. Pacific Time. Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.unioncommunityllc.com.
Listeners are advised to log on to the website at least 15 minutes prior to the call to download and / or install any necessary audio software. The conference call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the Union Community Partners Second Quarter 2014 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start of the conference call. A replay of the conference call will be available through September 10, 2014, by dialing 1-877-870-5176 for domestic participants or 1-858-384-5517 for international participants and entering the pass code 13587486. An archive of the webcast will be available on the Company’s website for a limited time.
About UCP, Inc.
UCP is a homebuilder and land developer with land acquisition and entitlement expertise with operations in California, Washington State, North Carolina, South Carolina, and Tennessee. UCP designs, constructs and builds high-quality, sustainable single-family homes for a variety of lifestyles and budgets through its wholly-owned subsidiaries, Benchmark Communities, LLC. The Benchmark Communities brand is recognized by homebuyers for its high-quality construction and craftsmanship, cutting-edge home design, and customer-centric service and warranty programs.
This press release contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed future results of operations, including descriptions of the Company's business strategy. These statements often include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. These statements are based on assumptions that the Company has made in light of its experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Although the Company believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance they will prove to be correct. Therefore, you should be aware that many factors could affect the Company's actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.
Any forward-looking statement made by the Company herein, or elsewhere, speaks only as of the date on which it was made. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.