Part I Business UHG designs and sells single-family homes in high-growth markets, using a land-light strategy and reporting $463.7 million revenue in 2024 - UHG operates a land-light model, with 98% of its approximately 7,700 controlled lots secured through lot option contracts as of December 31, 2024. This strategy reduces upfront capital requirements and financial risk30 - The company is organized into three segments: GSH South Carolina (entry-level/first move-up), Rosewood (second/third move-up), and Other (Raleigh operations and mortgage joint venture)2933 Key Operational Metrics (2024 vs. 2023) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Net New Orders (Units) | 1,399 | 1,296 | 8% | | Closings (Units) | 1,431 | 1,383 | 3% | | Cancellation Rate | 11.4% | 13.6% | (16.2)% | | Backlog (Units) | 157 | 189 | (16.9)% | | Backlog Value | $58.3M | $57.6M | 1.2% | Owned and Controlled Lots by Market (as of Dec 31) | Market/Division | 2024 Total Lots | 2023 Total Lots | | :--- | :--- | :--- | | Midlands | 4,800 | 5,128 | | Coastal | 1,221 | 1,142 | | Upstate | 1,390 | 2,234 | | Rosewood | 195 | 283 | | Raleigh | 84 | 261 | | Total | 7,690 | 9,048 | - UHG's growth strategy includes leveraging macro housing trends, capitalizing on core market growth, accretive M&A, exploring Build-to-Rent (BTR) relationships, and growing ancillary revenue through its mortgage joint venture, Homeowners Mortgage37 Risk Factors The company faces risks from land acquisition, market conditions, financing, and its dual-class stock structure, having remediated prior internal control weaknesses - Business Risks: The company's operations are highly dependent on its ability to secure an adequate inventory of lots at reasonable prices. Its geographic concentration in South Carolina, Georgia, and North Carolina exposes it to regional economic downturns7883 - Industry Risks: The homebuilding industry is cyclical and highly sensitive to economic conditions, interest rates, consumer confidence, and the availability of mortgage financing. The company also faces risks from supply shortages, trade policies affecting material costs, and construction defect claims121127131 - Financing Risks: UHG has significant debt, including a Syndicated Line of Credit and a Term Loan, with restrictive covenants that could limit operational flexibility. As of December 31, 2024, consolidated homebuilding debt was approximately $50.2 million139140141 - Organizational & Ownership Risks: A dual-class stock structure gives the Executive Chairman, Michael Nieri, and related trusts majority voting control, potentially limiting the influence of Class A stockholders. The company is also a "controlled company" under Nasdaq rules, allowing for exemptions from certain governance requirements156158 - Internal Control Risks: The company identified and has since remediated material weaknesses in its internal control over financial reporting. Failure to maintain effective controls could adversely affect investor confidence and the accuracy of financial reporting188582 Unresolved Staff Comments The company reports that it has no unresolved staff comments - None207 Cybersecurity UHG maintains a NIST-based cybersecurity program overseen by the Audit Committee, integrating risk management and third-party assessments, with no material incidents reported - The company's cybersecurity program is based on the National Institute of Standards and Technology (NIST) framework208 - The Board's Audit Committee has primary responsibility for overseeing cybersecurity risks, receiving regular briefings from the Chief Administrative Officer and Director of IT218219 - UHG has not encountered any cybersecurity challenges that have materially impaired its operations or financial standing215 Properties UHG leases its corporate headquarters in Chapin, SC, and other operational offices in its key markets - The company leases its corporate headquarters in Chapin, SC, and other operational offices in its key markets222 Legal Proceedings UHG is subject to ordinary course litigation, including a specific lawsuit against its subsidiary Rosewood, with potential losses currently unestimable - UHG is involved in ordinary course litigation, primarily construction defect claims224517 - Its subsidiary, Rosewood, is a co-defendant in a lawsuit alleging negligence and breach of warranties for homes built before the acquisition. The company cannot currently estimate the potential loss518519 Mine Safety Disclosures This item is not applicable to the company - Not applicable225 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities UHG's Class A common shares and public warrants are listed on Nasdaq, with no cash dividends paid or planned, as earnings are retained for operations - Class A common stock trades on the Nasdaq Global Market under the symbol "UHG"227 - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future228 Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations UHG's 2024 revenue grew to $463.7 million, but net income fell to $46.9 million, primarily due to a $45.6 million debt extinguishment loss and reduced derivative gains Consolidated Results of Operations (in thousands) | | Year Ended Dec 31, 2024 (in thousands) | Year Ended Dec 31, 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue, net | $463,714 | $421,474 | 10.0% | | Gross Profit | $79,830 | $79,726 | 0.1% | | Gross Profit % | 17.2% | 18.9% | (9.0)% | | Loss on extinguishment of Convertible Notes | ($45,642) | $0 | NM | | Change in fair value of derivative liabilities | $88,653 | $115,905 | (23.5)% | | Net Income | $46,906 | $125,060 | (62.5)% | - The decrease in net income was primarily driven by a $45.6 million loss on the extinguishment of Convertible Notes, a smaller gain on the change in fair value of derivative liabilities, and increased SG&A expenses256257259 Non-GAAP Financial Measures (in thousands) | | Year Ended Dec 31, 2024 (in thousands) | Year Ended Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Adjusted Gross Profit | $92,407 | $90,081 | | Adjusted Gross Profit % | 19.9% | 21.4% | | Adjusted EBITDA | $31,636 | $40,470 | | Adjusted EBITDA Margin % | 6.8% | 9.6% | Summary of Cash Flows (in thousands) | | Year Ended Dec 31, 2024 (in thousands) | Year Ended Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $15,444 | $28,225 | | Net cash used in investing activities | ($12,586) | ($24,301) | | Net cash (used in) provided by financing activities | ($33,980) | $40,509 | - The company's financial comparability is affected by its March 2023 Business Combination, its transition to a C-corporation subject to corporate-level taxes, and increased SG&A costs associated with being a public company242243245246 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on variable-rate debt, with a 100 basis point increase estimated to reduce net income by $1.2 million annually - The company is exposed to market risk from interest rate fluctuations on its variable-rate debt under the Syndicated Line and Term Loan315316 - A hypothetical 100 basis point (1%) increase in interest rates would reduce the company's net income by approximately $1.2 million annually317 Financial Statements and Supplementary Data This section presents UHG's audited consolidated financial statements for 2024 and 2023, reflecting the company's transition to a public entity following the March 2023 business combination Consolidated Balance Sheets Total assets decreased to $265.4 million, while liabilities significantly reduced to $198.5 million, leading to positive stockholders' equity of $66.9 million as of December 31, 2024 Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2024 (in millions) | Dec 31, 2023 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $22.6 | $56.7 | | Inventories | $139.3 | $182.8 | | Total Assets | $265.4 | $298.6 | | Derivative liabilities | $39.2 | $127.6 | | Total Liabilities | $198.5 | $329.8 | | Total Stockholders' Equity (Deficit) | $66.9 | ($31.2) | Consolidated Statements of Operations For 2024, UHG reported $463.7 million in revenue and $46.9 million net income, with basic EPS of $0.96, significantly lower due to a debt extinguishment loss Key Income Statement Data (Year Ended Dec 31, 2024) | Metric | Amount (USD) | | :--- | :--- | | Revenue, net | $463,714,017 | | Gross Profit | $79,830,266 | | Net Income | $46,905,740 | | Basic EPS | $0.96 | | Diluted EPS | $0.90 | Notes to the Consolidated Financial Statements Notes detail accounting policies, the 2023 reverse recapitalization, segment reporting, recent acquisitions, debt facilities, convertible note redemption, and equity compensation plans - Business Combination (Note 2): The March 2023 transaction with DHHC was accounted for as a reverse recapitalization, with Legacy UHG as the accounting acquirer360 - Business Acquisitions (Note 5): The company completed acquisitions of Creekside Custom Homes in Jan 2024 for $12.7 million, Rosewood Communities in Oct 2023 for $24.7 million, and Herring Homes in Aug 2023 for $2.2 million445449453 - Debt (Note 9): As of Dec 31, 2024, the company had $50.2 million outstanding under its $220 million Syndicated Line with Wells Fargo and $67.2 million outstanding under a new Term Loan with Kennedy Lewis, which was used to redeem convertible notes473485 - Convertible Notes (Note 14): In December 2024, the company redeemed its outstanding convertible notes, resulting in a one-time loss on extinguishment of $45.6 million530531 - Stock Compensation & Earnouts (Notes 15 & 16): The company has various equity incentive plans, including stock options, RSUs, and PSUs. There are up to 21.9 million contingently issuable Earnout Shares tied to stock price targets through March 2028533556 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None578 Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2024, having remediated previously identified material weaknesses in internal controls - Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2024580581 - The company identified several material weaknesses during 2023 and 2024, including issues with tax review controls, IT general controls, segregation of duties, and execution of related party transactions582 - Remediation efforts included enhancing IT controls, adding personnel, implementing stricter review processes, and improving the adoption of the COSO framework. Management has concluded these weaknesses were remediated as of year-end 2024583586 Other Information The company reports no other information - None588 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable589 Part III Directors, Executive Officers and Corporate Governance Information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement591 Executive Compensation Information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement592 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement593 Certain Relationships and Related Transactions, and Director Independence Information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement594 Principal Accountant Fees and Services Information is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement595 Part IV Exhibits and Financial Statement Schedules This section lists the exhibits filed with or incorporated by reference into the Form 10-K, including key agreements and certifications - Lists all exhibits filed with the Form 10-K, such as debt agreements, employment contracts, and certifications598 Form 10-K Summary The company reports no Form 10-K summary - None601
DIAMONDHEAD(DHHC) - 2024 Q4 - Annual Report