Early this morning, Aliso Viejo, Calif.-based The New Home Company reported big gains in its second quarter performance.
The big highlight was the 103% jump in total revenues, which moved from $22.5 million to $45.6 million. The equity in net income from its joint ventures rose from $0.2 million to $3.3 million. New Home’s average selling price also took a dramatic year-over-year leap—going from $739,000 to $1.6 million. But that dynamic will remain volatile.
“The expansion in the average selling price was due to a change in product mix to communities with higher average selling prices located in Irvine, California,” the company said in its earnings release. “The Company expects that the average selling price will continue to vary significantly from quarter to quarter due to the mix of homes offered and the low level of wholly-owned deliveries as the Company opens new communities.”
New Home did see a precipitous decline in gross margins, which fell from 17.6% to 10.4%.
“The decrease in gross margin percentage was substantially driven by the close-out of two communities in Sacramento that required higher incentives, and to a lesser extent, a higher mix of deliveries from two master-planned communities in Irvine with seller profit participation,” the company said in the release.
Unlike many public builders, New Home relies on a joint venture and fee model. But in the second quarter, New Home’s wholly owned business saw the biggest jump—with its wholly owned community count doubling from four to eight, and backlog more than tripling from $40 million to $137 million.
But the joint venture business also grew as well with the amount in backlog doubling. New Home’s backlog dollar value of joint ventures (JVs) doubled to $284 million, while JV community count jumped 43%--from seven to 10.
“We are pleased with the contributions from our joint venture and fee building businesses,” said Larry Webb, the company’s CEO in its earning release. They continue to support our ability to leverage our capital base and overhead infrastructure as we continue to grow our wholly-owned business. In addition, to further augment our strong land pipeline, we added two unique sites located in the premier coastal master-plan of Crystal Cove. As we move forward, we are committed to executing our operating strategy and believe we have laid the foundation for a strong finish in the second half of 2015 leading to our full year success.”
Here are some other highlights from the quarter compared to 2014’s second quarter:
- Home sales revenue was $19.2 million, compared to $9.6 million.
- New home deliveries were 12, compared to 13.
- New home orders were up 74% to 40 homes, compared to 23 homes.
- The average sales price of homes in backlog at the end of the second quarter was up 33% to $2.1 million, compared to $1.6 million.