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United Homes (UHG) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements Unaudited condensed consolidated financial statements for Q1 2025 reflect decreased revenue and net income, stable total assets, reduced liabilities, and improved operating cash flow compared to Q1 2024 Condensed Consolidated Balance Sheets As of March 31, 2025, total assets slightly increased to $266.2 million, while total liabilities decreased to $179.1 million, boosting stockholders' equity to $87.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $266,227 | $265,381 | | Cash and cash equivalents | $25,016 | $22,629 | | Inventories | $138,449 | $139,270 | | Total Liabilities | $179,126 | $198,514 | | Syndicated line of credit | $53,196 | $50,196 | | Derivative liabilities | $17,836 | $39,158 | | Term loan, net | $67,230 | $67,150 | | Total Stockholders' Equity | $87,101 | $66,867 | Condensed Consolidated Statements of Operations Q1 2025 net income decreased to $18.2 million on $87.0 million revenue, influenced by a non-cash gain from derivative liabilities, resulting in diluted EPS of $0.31 Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue, net | $87,001 | $100,838 | | Gross Profit | $14,128 | $16,094 | | Net loss from operations | $(2,032) | $(960) | | Change in fair value of derivative liabilities | $21,209 | $26,380 | | Net Income | $18,180 | $24,938 | | Diluted EPS | $0.31 | $0.44 | Condensed Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased by $20.2 million to $87.1 million in Q1 2025, primarily driven by net income and stock-based compensation expense - Stockholders' equity grew from $66.9 million at the end of 2024 to $87.1 million at the end of Q1 2025, mainly due to net income of $18.2 million19 Condensed Consolidated Statements of Cash Flows Q1 2025 saw net cash provided by operating activities of $1.2 million, a significant improvement from Q1 2024, with total cash ending at $27.9 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $1,221 | $(17,898) | | Net cash from investing activities | $63 | $(12,752) | | Net cash from financing activities | $1,103 | $2,629 | | Net change in cash | $2,387 | $(28,021) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, business nature, and key disclosures including land-light strategy, VIEs, segment performance, fair value measurements, debt, and stock-based compensation - The company operates a land-light strategy, primarily constructing single-family homes in South Carolina, North Carolina, and Georgia25 - The company has determined that its counterparties to option contracts are Variable Interest Entities (VIEs), but it is not the primary beneficiary and therefore does not consolidate them, with maximum exposure to loss limited to non-refundable lot deposits35 - In December 2024, the company redeemed its outstanding Convertible Notes, financing the transaction in part by entering into a new $70.0 million term loan87 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses challenging Q1 2025 market conditions, leading to decreased revenue and orders, and outlines responses including sales incentives and operational improvements, while confirming sufficient liquidity Key Operating Metrics Q1 2025 vs Q1 2024 | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue, net | $87,001K | $100,838K | (13.7)% | | Home closings | 252 | 311 | (19.0)% | | Net new orders | 296 | 384 | (22.9)% | | Backlog (units) | 201 | 262 | (23.3)% | | Cancellation rate | 12.7% | 9.6% | 32.3% | - Market conditions in Q1 2025 were challenging due to elevated mortgage rates, economic uncertainty, and housing affordability concerns, leading to softer demand111 - The company is responding to market conditions with sales incentives (e.g., mortgage rate buy-downs) and operational improvements like revising house plans and rebidding supplier contracts to reduce costs112 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from interest rate fluctuations impacting housing demand and variable-rate debt, with a 100 basis point increase potentially reducing annual net income by $1.2 million - The company is exposed to market risk from interest rate fluctuations on its variable-rate debt, which includes a $53.2 million syndicated line of credit and a $67.2 million term loan as of March 31, 2025167 - A 100 basis point increase in overall interest rates would negatively impact the company's net income by approximately $1.2 million annually167 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - Management concluded that disclosure controls and procedures were effective as of the end of the quarter168 - No changes occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting169 PART II. OTHER INFORMATION Legal Proceedings The company faces ordinary course legal claims, including a specific lawsuit against its subsidiary Rosewood for pre-acquisition construction defects, with potential losses currently unestimable - The company's subsidiary, Rosewood, is a co-defendant in a lawsuit alleging negligence and breach of implied warranties related to construction prior to its acquisition85 - Management believes a loss is reasonably possible but cannot estimate the amount or range of loss at this time86 Risk Factors No material changes to risk factors from the latest 10-K, but key risks include cyclical homebuilding industry sensitivity to economic conditions, trade policies, and adverse weather events - The residential homebuilding industry is highly cyclical and significantly affected by changes in economic conditions, including interest rates, employment levels, and consumer confidence173 - Changes in U.S. trade policies and tariffs on imported materials like steel, aluminum, and lumber could significantly increase construction costs and negatively impact margins178 - Adverse weather, such as the abnormal snow events in South Carolina in early 2025, can harm business by decreasing buyer traffic and delaying construction176 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported for the quarter ended March 31, 2025, not previously disclosed in a Form 8-K - No unregistered sales of the Company's securities were reported for the quarter ended March 31, 2025183 Defaults Upon Senior Securities No defaults upon senior securities were reported during the quarter - No defaults upon senior securities were reported183 Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable181 Other Information No other material events or information were reported for the quarter ended March 31, 2025, not covered elsewhere in the report - No other information was reported for the quarter182 Exhibits This section indexes all exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL files for financial data - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act188