United Homes Group, Inc. Q4 FY2024 earnings call

• Product refresh: Began updating floor plans and refreshing homes in Q4, with positive initial response; pre-sales of refreshed plans are strong with improved gross margins.
• Direct cost re-bidding: Re-bidding direct cost categories to lower costs, with significant wins already seen.
• Inventory and operations: Reduced HVAC inventory, new home deliveries up 7% year-over-year in Q4, net new home orders up 19%; new home starts down 26% due to product redesign and strategic shift; sales per month per community increased to 2.5 in Q4.
• Capital markets: Refinanced convertible notes in December, reducing leverage by $10 million, lowering cash interest expense by 320 basis points, and reducing potential dilution by about 30%.
• Community and plans: Active communities fell to 46 at year-end; 11 communities planned to open in Q2 2025 and 15 in Q3 2025.

For the fourth quarter of 2024, revenue was $134.8 million compared to $116.8 million in the fourth quarter of 2023. Full year 2024 revenue was $463.7 million, up from $421.5 million in 2023. Home closings in the fourth quarter of 2024 were 414 compared to 387 in the prior year's quarter. Full year home closings increased to 1,431 homes, up from 1,383 in 2023. Gross profit for the fourth quarter of 2024 was $21.8 million with a margin of 16.2%, while full year gross profit was $79.8 million with a margin of 17.2%. Adjusted gross profit margin for the fourth quarter was 18.1% and for the full year was 19.9%. SG&A expense in the fourth quarter was $19.3 million, with adjusted SG&A at $17.7 million or 13.1% of revenue. Full year SG&A expense was $74.7 million, with adjusted SG&A at $64.5 million or 13.9% of revenue.

• January net new orders were lower than last year, but February bounced back and first week of March was consistent with late February trends.
• Unusually heavy snow in January impacted traffic and sales activity, which will affect March closings.
• Optimistic about long-term outlook due to strong housing fundamentals in markets, land control via option agreements, product redesign, cost savings, and improved capital structure.

• Market competition: Competitive environment with builders sacrificing gross margin for volume.
• High mortgage rates: Negatively impact affordability and affect gross margins due to mortgage incentives.
• Inventory levels: Completed inventory remains high, with competitors offering discounts, affecting pricing and margins.
• Weather impact: Unusually heavy snow in January impacted sales activity and will affect March closings.