Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- United Homes Group Inc (UHG, Financial) has a strong pipeline of 9,300 lots, with over 95% controlled via option agreements or land banking arrangements, reducing risk and upfront costs.
- The company delivered 337 homes in Q2 2024, generating $109 million in revenue, with significant contributions from the Midlands, upstate, and coastal operations.
- UHG's coastal operations posted a 59% order growth, and upstate operations generated a 44% order growth year-over-year.
- The company is seeing improvements in construction as building materials and labor availability have improved, with lumber costs trending down, which is expected to benefit margins.
- UHG ended the quarter in a strong financial condition with $80 million in total liquidity, including $25 million in cash and $55 million of availability on its credit facility.
Negative Points
- Net income for Q2 2024 was impacted by a change in fair value related to potential earnout liabilities, which fluctuates based on stock price, affecting financial statements.
- Revenue for Q2 2024 decreased to $109.4 million from $122.1 million in Q2 2023, and home closings also decreased from 385 homes in Q2 2023 to 337 homes in Q2 2024.
- Gross profit margins decreased to 17.9% in Q2 2024 from 19.6% in Q2 2023, primarily due to higher levels of sales incentives and nonrecurring expenses.
- The company continues to face challenges with rising lot costs, which may offset gains from decreasing lumber costs.
- UHG's net new orders were flat year-over-year, with 323 homes in Q2 2024 compared to 341 homes in Q2 2023, indicating a need for strategic adjustments to improve absorption rates.
Q & A Highlights
Q: Can you talk about your absorption rates and strategy for improvement?
A: John Micenko, President: We aim for absorption rates in the high threes to low fours. We focus on slower-moving communities, assessing product, price, and competitive landscape. It's a tactical and cultural shift, emphasizing pace over price and encouraging sales efforts.
Q: The lot count under control seems down. Can you discuss this and the current land and acquisition market?
A: John Micenko, President: We are tightening our land acquisition criteria, focusing on margin and absorption pace. The land market remains competitive, with rising costs. The acquisition market is robust, but we are selective, focusing on deals that align with our strategy.
Q: Where are you in integrating recent acquisitions, and does your strategy change with interest rates coming down?
A: John Micenko, President: Integration varies by acquisition, with some nearly complete and others ongoing. Our strategy remains focused on affordability, targeting first-time and move-up buyers. We adjust incentives based on market conditions, offering rate buy-downs and closing cost options.
Q: How does the current land environment affect your operations?
A: John Micenko, President: Land remains a critical and competitive area. We are cautious with acquisitions, ensuring they meet our standards. We have sufficient lots for 2025 and are working on securing more for 2026, focusing on quality and strategic fit.
Q: How are you managing costs and margins with current market conditions?
A: John Micenko, President: We see improvements in input costs, particularly lumber, and are renegotiating trade terms. This should enhance margins for homes started in July and August. We also adjust incentives based on buyer preferences, balancing rate buy-downs and closing costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
