markdown Part I. Financial Information [Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2025 and 2024, covering balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) By March 31, 2025, total assets slightly increased, while a significant reduction in derivative liabilities drove down total liabilities, leading to a notable rise in stockholders' equity | Balance Sheet Highlights (In thousands) | 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](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income for Q1 2025 decreased to $18.2 million from $24.9 million YoY, driven by lower revenue and a smaller gain from derivative liabilities, resulting in diluted EPS falling to $0.31 | Statement of Operations (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 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](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased from $66.9 million to $87.1 million by March 31, 2025, primarily driven by $18.2 million in net income and $2.0 million in stock-based compensation expense - Stockholders' equity increased from **$66.9 million** on Dec 31, 2024, to **$87.1 million** on March 31, 2025[19](index=19&type=chunk) - The primary drivers of the equity increase were **$18.2 million** in net income and **$2.0 million** in stock-based compensation[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved to $1.2 million generated in Q1 2025 from $17.9 million used in Q1 2024, contributing to an ending cash balance of $27.9 million | Cash Flow Summary (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 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)** | | Cash, end of period | $27,936 | $28,651 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed accounting policies and disclosures for financial statement items, including the land-light strategy, segment reporting, and debt financing - The company operates with a **land-light strategy**, primarily constructing single-family homes in South Carolina, North Carolina, and Georgia[25](index=25&type=chunk) - UHG has three reportable segments: **GSH South Carolina** (entry-level and first move-up homes), **Rosewood** (second and third move-up homes), and **Other** (Raleigh, NC operations and a mortgage JV)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - As of March 31, 2025, the company had lot deposits of **$46.9 million** related to option contracts with an aggregate remaining purchase price of **$336.8 million**[36](index=36&type=chunk) - On December 11, 2024, the company redeemed its convertible notes and financed the transaction with a new **$70.0 million** term loan[67](index=67&type=chunk)[87](index=87&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, noting a challenging market with elevated mortgage rates that led to a 13.7% YoY revenue decrease and a 22.9% drop in net new orders, while liquidity remains sufficient | Key Metrics | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue, net | $87,001 K | $100,838 K | (13.7)% | | Home closings | 252 | 311 | (19.0)% | | Net new orders | 296 | 384 | (22.9)% | | Backlog (units) | 201 | 262 | (23.3)% | | Gross profit % | 16.2% | 16.0% | +0.2 p.p. | | Adjusted EBITDA | $2,873 K | $7,283 K | (60.6)% | - Market conditions in Q1 2025 were impacted by persistently elevated mortgage rates, macroeconomic uncertainty, and housing affordability concerns, leading to softer demand[111](index=111&type=chunk) - In response to market conditions, the company is utilizing sales incentives like mortgage rate buy-downs and executing operational improvements, including revising house plans and rebidding supplier contracts to reduce costs[112](index=112&type=chunk) - As of March 31, 2025, the company had **$25.0 million** in cash and cash equivalents and **$61.9 million** in unused capacity on its Syndicated Line, which management believes is sufficient for its needs[145](index=145&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, which impacts housing demand and borrowing costs, with a 100 basis point rate increase estimated to reduce annual net income by $1.2 million - The company's operations are sensitive to interest rate changes, which affect both homebuyer affordability and its own borrowing costs on variable-rate debt[165](index=165&type=chunk)[166](index=166&type=chunk) - A **100 basis point** increase in interest rates would reduce net income by approximately **$1.2 million** annually, based on the **$53.2 million** outstanding on the syndicated line of credit and **$67.2 million** on the term loan as of March 31, 2025[167](index=167&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) 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 the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[168](index=168&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2025[169](index=169&type=chunk) Part II. Other Information [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company faces ordinary course construction defect claims not expected to be material, though a specific lawsuit against Rosewood has a reasonably possible loss that cannot be estimated - The company is subject to ordinary course litigation, mainly consisting of construction defect claims, which are not expected to have a material adverse effect[84](index=84&type=chunk)[171](index=171&type=chunk) - The subsidiary Rosewood is a co-defendant in a lawsuit for which a loss is deemed reasonably possible, but the amount or range of loss cannot currently be estimated[85](index=85&type=chunk)[86](index=86&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Key risks, unchanged from the last annual report, include the cyclical nature of homebuilding, sensitivity to economic conditions, adverse weather events, and the impact of U.S. trade policies on costs - The residential homebuilding industry is highly cyclical and significantly affected by changes in general economic conditions, including interest rates, employment levels, and consumer confidence[173](index=173&type=chunk) - Adverse weather conditions, such as the abnormal snow events in South Carolina in early 2025, can harm business by decreasing buyer traffic and delaying construction[176](index=176&type=chunk) - Changes in U.S. trade policies, including tariffs on materials like lumber and steel, may significantly increase construction costs and negatively impact profit margins[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during Q1 2025 that were not previously disclosed in a Form 8-K - None[180](index=180&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon its senior securities during the quarter - None[183](index=183&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[181](index=181&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) This section reiterates no unregistered sales of securities occurred during the quarter that were not previously reported on a Form 8-K - During the quarter ended March 31, 2025, there were no unregistered sales of the Company's securities that were not reported in a Current Report on Form 8-K[183](index=183&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and Inline XBRL data files - The report includes an index of all exhibits filed, such as Sarbanes-Oxley certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101 series)[188](index=188&type=chunk)
DIAMONDHEAD(DHHC) - 2025 Q1 - Quarterly Report