Harbor Custom Development, Inc. Reports Record Revenues In 2022 First Quarter Financial Results
Continued Strength in Buyer Demand Drives Year-over-Year Sales Increase of 106.0%
Tacoma, Washington – (GLOBENEWSWIRE) – May 12, 2022 – Harbor Custom Development, Inc. (“Harbor,” “Harbor Custom Homes®,” or the “Company”), (NASDAQ: HCDI; HCDIP; HCDIW, HCDIZ), an innovative and market leading real estate company involved in all aspects of the land development cycle, today announced its financial results for the first quarter ended March 31, 2022.
First Quarter 2022 Financial Highlights Compared to First Quarter 2021
•Consolidated net sales of $28.6 million compared to $13.9 million
•Gross profit of $6.1 million compared to $0.6 million
•Gross margin of 21.2% compared to 4.4%
•Net income of $1.6 million compared to a net loss of $(1.5) million
•Basic loss per share (EPS) of $(0.03) compared to $(0.12)
•EBITDA of $3.5 million compared to $0.1 million
•Adjusted EBITDA of $3.9 million compared to $0.2 million
Full Year 2022 Outlook Estimate
•2022 revenue expectations remain at approximately $160 million
•2022 Adjusted EBITDA expectation remains at approximately $20 million
Harbor Custom Development’s President and CEO, Sterling Griffin stated, “We are extremely pleased with our team’s performance during the first quarter 2022. We again achieved a new quarterly record for top line sales coming in at $28.6 million, continuing the momentum from 2021. Our unique and flexible business model enabled us to achieve top line revenue growth of 106.0% on a year-over-year basis through the sale of entitled land, developed lots, single-family homes and fee build income. Our diverse revenue stream further validates our distinct business plan of monetizing our real estate assets at the most opportune time during the development life cycle.”
On a year-over-year basis, the Company also improved gross profit, gross margin, operating expenses as a percentage of sales, operating income, net income, EBITDA, and Adjusted EBITDA.
During the quarter, the Company continued to diversify geographically with the closing of the first two home sales in Texas with sales prices of approximately $400 per square foot. Further, the Company has continued to expand its product lines through the recent listing of six multi-family projects in Western Washington for $278 million. Mr. Griffin further commented, “As apartment values continue to escalate to unprecedented levels, we are well positioned to capitalize on this significant market opportunity.”
Results for the First Quarter 2022
Net sales for the first quarter 2022 increased by 106.0% to $28.6 million, compared to net sales of $13.9 million for the first quarter 2021. This increase was largely due to increases in home sales of $5.5 million, entitled land sales of $4.5 million, fee build revenues of $2.7 million, and sales of developed lots of $2.1 million.
Gross profit for the first quarter 2022 increased to $6.1 million compared to $0.6 million for the first quarter 2021. Gross margin for the first quarter 2022 improved to 21.2%, compared to 4.4% for the first quarter 2021. The $5.4 million increase in gross profit was primarily attributable to the increase in sales year-over-year, with entitled land sales having the largest impact. The 16.8% increase in gross margin was primarily driven by the significant margins attributable to the sale of entitled land.
Operating expenses for the first quarter 2022 were $3.8 million compared to $2.0 million for the first quarter 2021. This expected increase in operating expenses is primarily attributable to increases associated with the continued investment in public company infrastructure and our future growth plans, including payroll related costs, professional fees, marketing and advertising, and right of use expense for the new corporate office, as well as stock compensation and depreciation expense. Operating expenses as a percentage of sales for the first quarter 2022 were 13.4% compared to 14.8% for the first quarter 2021. The improvement in operating expenses as a percentage of sales is primarily due to the increased sales year-over-year which have allowed us to scale the business at a rate that is favorable to operating expenses incurred.
For the first quarter 2022, net income was $1.6 million compared to net loss of $(1.5) million for the first quarter 2021. Net loss attributable to common stockholders was $(0.4) million or $(0.03) basic EPS compared to $(1.5) million or $(0.12) loss per share.
EBITDA for the first quarter 2022 increased 2,967.0% to $3.5 million compared to EBITDA of $0.1 million for the first quarter 2021. Adjusted EBITDA, which excludes the impact of stock compensation and other non-recurring costs, for the first quarter 2022 increased by 1,600.0% to $3.9 million compared to $0.2 million for the first quarter 2021. For the first quarter 2022, Adjusted EBITDA as a percentage of net sales was 13.6% compared to 1.7% for the first quarter 2021.
Full Year 2022 Outlook Estimate
Based on our first quarter results, we reiterate our previously announced 2022 revenue guidance of approximately $160 million and Adjusted EBITDA guidance of approximately $20 million.
Reconciliation of the forward-looking full year 2022 Adjusted EBITDA estimate to net income is not being provided as we do not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation. Our management cannot estimate on a forward-looking basis without unreasonable effort the impact these variables and individual
adjustments will have on our reported net income and reported effective tax rate because these items, which could be significant, are difficult to predict and highly variable.
Financial Results Conference Call Details
Harbor will host a live conference call on Thursday, May 12, 2022, at 9:30 a.m. PT (12:30 p.m. ET) to elaborate on the first quarter results and the Company’s outlook. The public may access the conference call through a live audio webcast available at https://investors.harborcustomhomes.com/events. Those who would like to submit written questions in advance, please email: IR@harborcustomdev.com. The conference call will be available by telephone at 1-877-407-0789 (for international callers, dial 1-201-689-8562), and refer to “Harbor” or conference ID: 13729493. A replay of the conference call will be available for two weeks at 1-844-512-2921 (for international callers, dial 1-412-317-6671) using the replay PIN: 13729493.
About Harbor Custom Development, Inc.
Harbor Custom Development, Inc. is a real estate development company involved in all aspects of the land development cycle including land acquisition, entitlements, construction of project infrastructure, home building, marketing, sales, and management of various residential projects in Western Washington's Puget Sound region; Sacramento, California; Austin, Texas; and Punta Gorda, Florida. As a land developer and builder of apartments, condominiums, single-family homes, and luxury homes, Harbor Custom Development’s business strategy is to acquire and develop land strategically based on an understanding of population growth patterns, entitlement restrictions, infrastructure development, and geo-economic forces. Harbor focuses on acquiring land with scenic views to develop and sell residential lots, new home communities, and multi-story condominium and apartment properties within a 20- to 60-minute commute of the nation’s fastest-growing metro employment corridors. Harbor is leading the real estate industry as the first national land developer and home builder accepting payment in the form of cryptocurrency for its listed properties. For more information on Harbor Custom Development, Inc., please visit www.harborcustomdev.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to, but are not limited to, expectations of future operating results and financial performance, including GAAP and non-GAAP guidance for the year ending December 31, 2022, the calculation of certain of our key financial and operating metrics and expectations regarding sales of inventory, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “expect,” “plan,” anticipate,” “believe,” “estimate, “predict,” “target,” “project,” “intend,” “potential,” “would,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology that concerns our expectations, strategy, priorities, plans, or intentions. You should not put undue reliance on any forward-
looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. These forward-looking statements are subject to various risks and uncertainties, including without limitation complications due to COVID-19 which could cause delays in dates of completion or closings, changes in the real estate industry such as increases in mortgage interest rates which could dampen residential home purchases, and those risks and uncertainties set forth in the Company’s filings with the Securities and Exchange Commission. Thus, actual results could be materially different. This document includes statements of summarized financial projections. There will be differences between the projected and actual results because events and circumstances frequently do not occur as expected and those differences may be material. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events, or otherwise, except as required by law.
Use of Non-GAAP Financial Measures
This press release and the financial information contained herein include EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin, which are financial measures that have not been calculated in accordance with accounting principles generally accepted in the United States, (GAAP), and are therefore referred to as non-GAAP financial measures. We have provided definitions for these non-GAAP financial measures and tables in the schedules hereto to reconcile these non-GAAP financial measures to the comparable GAAP financial measures.
We believe that these non-GAAP financial measures provide valuable information regarding our earnings and business trends by excluding specific items that we believe are not indicative of the ongoing operating results of our businesses, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry.
We have provided these non-GAAP financial measures as supplemental information to our GAAP financial measures and believe these non-GAAP measures provide investors with additional meaningful financial information regarding our operating performance and cash flows. Our management and board of directors also use these non-GAAP measures as supplemental measures to evaluate our businesses and the performance of management, including the determination of performance-based compensation, make operating and strategic decisions, and to allocate financial resources. We believe that these non-GAAP measures also provide meaningful information for investors and securities analysts to evaluate our historical and prospective financial performance. These non-GAAP measures should not be considered a substitute for or superior to GAAP results. Furthermore, the non-GAAP measures presented by us may not be comparable to similarly titled measures of other companies.
Investor Relations
Hanover International
IR@harborcustomdev.com 866-744-0974
| HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES | |||||||||||
| D/B/A HARBOR CUSTOM HOMES | |||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash | $ | 22,274,900 | $ | 25,629,200 | |||||||
| Restricted Cash | 597,600 | 597,600 | |||||||||
| Accounts Receivable, net | 1,177,200 | 1,113,500 | |||||||||
| Contract Assets, net | 2,639,100 | 2,167,200 | |||||||||
| Notes Receivable | 12,746,800 | 2,000,000 | |||||||||
| Prepaid Expense and Other Assets | 2,526,000 | 2,778,100 | |||||||||
| Real Estate | 129,069,400 | 122,136,100 | |||||||||
| Property, Plant and Equipment, net | 9,938,400 | 9,199,700 | |||||||||
| Right of Use Assets | 2,535,000 | 3,429,700 | |||||||||
| Deferred Tax Assets | 1,014,100 | 649,000 | |||||||||
| TOTAL ASSETS | $ | 184,518,500 | $ | 169,700,100 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Accounts Payable and Accrued Expenses | $ | 15,917,300 | $ | 10,662,800 | |||||||
| Dividends Payable | 670,900 | 670,900 | |||||||||
| Deferred Revenue | 123,000 | 44,800 | |||||||||
| Revolving Line of Credit Loan, net of Debt Discount of $1.1M and $0 respectively | 10,987,000 | — | |||||||||
| Equipment Loans | 5,167,600 | 5,268,500 | |||||||||
| Note Payable D&O Insurance | 519,400 | 903,800 | |||||||||
| Finance Leases | 129,900 | 543,400 | |||||||||
| Construction Loans, net of Debt Discount of $1.6M and $4.4M respectively | 37,080,400 | 34,957,100 | |||||||||
| Construction Loans - Related Party, net of Debt Discount of $0.03M and $1.1M respectively | 10,940,200 | 13,426,600 | |||||||||
| Right of Use Liabilities | 3,361,200 | 3,484,400 | |||||||||
| TOTAL LIABILITIES | $ | 84,896,900 | $ | 69,962,300 | |||||||
| STOCKHOLDERS’ EQUITY | |||||||||||
| Preferred Stock, No Par, 10,000,000 shares authorized and 4,016,955 issued and outstanding at March 31, 2022 and December 31, 2021 | $ | 66,507,500 | $ | 66,507,500 | |||||||
| Common Stock, No Par, 50,000,000 shares authorized and 13,237,179 outstanding at March 31, 2022 and 13,155,342 issued and outstanding at December 31, 2021 | 32,133,200 | 32,122,700 | |||||||||
| Additional Paid In Capital | 993,200 | 752,700 | |||||||||
| Retained Earnings (Accumulated Deficit) | (12,300) | 1,646,500 | |||||||||
| Total Stockholders’ Equity | 99,621,600 | 101,029,400 | |||||||||
| Non-Controlling Interest | — | (1,291,600) | |||||||||
| TOTAL STOCKHOLDERS’ EQUITY | 99,621,600 | 99,737,800 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 184,518,500 | $ | 169,700,100 | |||||||
| HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES | |||||||||||
| D/B/A HARBOR CUSTOM HOMES | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Sales | $ | 28,581,000 | $ | 13,874,200 | |||||||
| Cost of Sales | 22,526,300 | 13,267,000 | |||||||||
| Gross Profit | 6,054,700 | 607,200 | |||||||||
| Operating Expenses | 3,839,300 | 2,049,800 | |||||||||
| Operating Income (Loss) | 2,215,400 | (1,442,600) | |||||||||
| Other Income (Expense) | |||||||||||
| Loss on Sale of Equipment | — | (35,900) | |||||||||
| Other Income | 7,900 | 27,400 | |||||||||
| Interest Income | 55,000 | — | |||||||||
| Interest Expense | (124,500) | (98,100) | |||||||||
| Total Other Expense | (61,600) | (106,600) | |||||||||
| Income (Loss) Before Income Tax | 2,153,800 | (1,549,200) | |||||||||
| Income Tax Expense | 508,500 | — | |||||||||
| Net Income (Loss) | $ | 1,645,300 | $ | (1,549,200) | |||||||
| Net Income (Loss) Attributable to Non-controlling interests | (500) | 600 | |||||||||
| Preferred Dividends | (2,012,500) | — | |||||||||
| Net Loss Attributable to Common Stockholders | $ | (366,700) | $ | (1,549,800) | |||||||
| Loss Per Share - Basic | $ | (0.03) | $ | (0.12) | |||||||
| Loss Per Share - Diluted | $ | (0.03) | $ | (0.12) | |||||||
| Weighted Average Common Shares Outstanding - Basic | 13,200,758 | 13,269,055 | |||||||||
| Weighted Average Common Shares Outstanding - Diluted | 13,200,758 | 13,269,055 | |||||||||
| HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES | |||||||||||
| D/B/A HARBOR CUSTOM HOMES | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net Income (Loss) | $ | 1,645,300 | $ | (1,549,200) | |||||||
| Adjustments to reconcile net income (loss) to net cash from operating activities: | |||||||||||
| Depreciation | 303,800 | 240,200 | |||||||||
| Amortization of right of use assets | 195,500 | 70,900 | |||||||||
| Lease incentives | 260,100 | — | |||||||||
| Loss on sale of equipment | — | 35,900 | |||||||||
| Stock compensation | 242,400 | 115,100 | |||||||||
| Forgiveness on PPP loan | — | (10,000) | |||||||||
| Amortization of revolver issuance costs | 45,700 | — | |||||||||
| Net change in assets and liabilities: | |||||||||||
| Accounts receivable | (63,700) | 43,600 | |||||||||
| Retainage receivable | — | (250,000) | |||||||||
| Contract assets | (471,900) | — | |||||||||
| Notes receivable | (10,746,800) | — | |||||||||
| Prepaid expenses and other assets | 691,500 | 155,200 | |||||||||
| Real estate | (6,347,500) | (14,712,100) | |||||||||
| Deferred tax asset | (365,100) | — | |||||||||
| Accounts payable and accrued expenses | 5,254,600 | (93,800) | |||||||||
| Deferred revenue | 78,200 | (896,300) | |||||||||
| Payments on right of use liability | (123,200) | (66,100) | |||||||||
| NET CASH USED IN OPERATING ACTIVITIES | (9,401,100) | (16,916,600) | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Purchase of property and equipment | (1,042,600) | (149,100) | |||||||||
| Proceeds on the sale of equipment | — | 69,500 | |||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (1,042,600) | (79,600) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Construction loans | 6,640,800 | 4,645,000 | |||||||||
| Payments on construction loans | (6,930,800) | (5,070,500) | |||||||||
| Financing fees construction loans | (577,500) | (92,900) | |||||||||
| Related party construction loans | 3,757,300 | 4,708,800 | |||||||||
| Payments on related party construction loans | (3,838,700) | (4,424,300) | |||||||||
| Financing fees related party construction loans | — | (376,900) | |||||||||
| Revolving line of credit loan | 12,038,900 | — | |||||||||
| Financing fees revolving line of credit loan | (1,097,700) | — | |||||||||
| Payments on financing leases | (43,500) | (101,300) | |||||||||
| Payments on PPP loan | — | (3,400) | |||||||||
| Repayments on note payable D&O insurance | (384,500) | (368,500) | |||||||||
| Net proceeds from issuance of common stock | — | 25,101,000 | |||||||||
| Preferred dividends | (2,012,500) | — | |||||||||
| Payments on equipment loans | (471,000) | (415,600) | |||||||||
| Proceeds from exercise of stock options | 8,600 | 18,000 | |||||||||
| Deferred offering cost | — | 27,300 | |||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 7,089,400 | 23,646,700 | |||||||||
| NET (DECREASE) INCREASE IN CASH AND RESTRICTED CASH | (3,354,300) | 6,650,500 | |||||||||
| CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD | 26,226,800 | 2,396,500 | |||||||||
| CASH AND RESTRICTED CASH AT END OF PERIOD | $ | 22,872,500 | $ | 9,047,000 | |||||||
| HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES | |||||||||||
| D/B/A HARBOR CUSTOM HOMES | |||||||||||
| RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (Unaudited) | |||||||||||
| For the Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net Income (Loss) | $ | 1,645,300 | $ | (1,549,200) | |||||||
| Interest Expense - Cost of Sales | 922,700 | 1,325,200 | |||||||||
| Interest Expense - Other | 124,500 | 98,100 | |||||||||
| Depreciation | 303,800 | 240,200 | |||||||||
| Amortization | 800 | — | |||||||||
| Tax Expense | 508,500 | — | |||||||||
| EBITDA | $ | 3,505,600 | $ | 114,300 | |||||||
| Stock compensation | 242,400 | 115,000 | |||||||||
| Other non-recurring costs | 150,200 | — | |||||||||
| Total Add backs | 392,600 | 115,000 | |||||||||
| Adjusted EBITDA | $ | 3,898,200 | $ | 229,300 | |||||||
EBITDA is defined as consolidated net income (loss) before interest, taxes, depreciation, and amortization.
Adjusted EBITDA is defined as consolidated net income (loss) before interest, taxes, depreciation, and amortization, equity-based compensation expense and other non-recurring costs, which are deemed to be transitional in nature or not related to our core operations.
Adjusted EBITDA margin is Adjusted EBITDA as a percentage of sales.