ALISO VIEJO, Calif.–(BUSINESS WIRE)–The New Home Company Inc. (NYSE: NWHM) today announced results for the
2019 first quarter.

First Quarter 2019 Financial Results

• Net loss of $2.0 million, or $(0.10) per diluted share, including $1.8
  million of pretax severance charges, compared to net loss of $0.6
  million, or $(0.03) per diluted share, for the 2018 first quarter
• Adjusted net loss of $0.8 million*, or $(0.04)* per diluted share,
  excluding severance charges
• Home sales revenue up 25% to $99.2 million; deliveries up 18%
• Total revenues of $118.8 million vs. $123.2 million
• Backlog dollar value of $212.6 million vs. $228.1 million
• Ending community count up 22%
• Repurchased $5.0 million of the Company’s 7.25% Senior Notes due 2022,
  resulting in a pretax gain of $0.4 million

• Repurchased 153,916 shares of common stock for $1.0 million

“Lower interest rates, moderating home prices, and improvement in the
equity markets helped spur buyer demand and order activity during the
first quarter, with March being the strongest month,” said Larry Webb,
Chairman and Chief Executive Officer of The New Home Company. “While
sales demand and first quarter absorption rates were lower than the
prior year first quarter, absorption rates were up 42% over the fourth
quarter which led to a 62% sequential increase in net new orders. In
addition, we made progress on our diversification strategy and increased
home sales revenue by 25%, deliveries by 18%, and home sales gross
margins by 40 basis points over the prior year first quarter.”

Mr. Webb continued, “We remain focused on repositioning our portfolio to
include more affordable product where we believe sales demand is deeper
and sales pace is more robust. We opened three new communities during
the quarter with base pricing below $600,000 and anticipate opening
three more during the second quarter at similar price points. In
addition, we took steps to right-size our operations and cost structure
by reducing headcount to better align our business with recent demand
levels.”

Mr. Webb concluded, “We continue to take steps to lower our cost
structure, strengthen our balance sheet, pursue opportunities to reduce
our leverage, and thoughtfully allocate resources to best position the
Company for long-term success. We acknowledge the challenges that
currently face our business and believe our Company has the right team
in place to generate long-term value for our shareholders.”

First Quarter 2019 Operating Results

Total revenues for the 2019 first quarter were $118.8 million, compared
to $123.2 million in the prior year period. Net loss attributable to the
Company for the 2019 first quarter was $2.0 million, or $(0.10) per
diluted share, compared to a net loss of $0.6 million, or $(0.03) per
diluted share, in the prior year period. Adjusted net loss for the 2019
first quarter after excluding severance charges was $0.8 million*, or
$(0.04)* per diluted share. The year-over-year decrease in income was
primarily attributable to $1.8 million in pretax severance charges in
the 2019 first quarter related to right-sizing our operations by
reducing headcount, a 40 basis point increase in selling and marketing
costs as a percentage of homes sales revenue, and a $0.7 million
decrease in fee building margin due to lower fee construction activity.
Partially offsetting these decreases was a 25% increase in home sales
revenue, a 40 basis point increase in home sales gross margin, a 10
basis point improvement in general and administrative costs as a
percentage of home sales revenue (190 basis point improvement excluding
severance costs*), and a $0.4 million gain on the early extinguishment
of debt.

Wholly Owned Projects

Home sales revenue for the 2019 first quarter increased 25% to $99.2
million, compared to $79.4 million in the prior year period. The
increase in home sales revenues was driven by an 18% increase in
deliveries, and to a lesser extent, a 6% increase in average selling
price to $1.0 million. The higher year-over-year average selling price
was impacted by mix, including pulling forward our first deliveries from
our higher-priced Icon community in Scottsdale, Arizona, where the
average price topped $2.2 million.

Gross margin from home sales for the 2019 first quarter was 12.7% as
compared to 12.3% in the prior year period. The 40 basis point increase
was primarily due to a mix shift, which was partially offset by higher
interest costs and incentives. Adjusted homebuilding gross margin for
the 2019 first quarter, which excludes interest in cost of home sales,
was 17.6%*, compared to 15.7%* in the prior year period.

Our SG&A expense ratio as a percentage of home sales revenue for the
2019 first quarter was 16.2% versus 15.9% in the prior year period. The
30 basis point increase in the SG&A rate was primarily due to severance
charges and higher amortization of capitalized selling and marketing
costs related to a higher community count in the 2019 first quarter, and
to a lesser extent, an amortization expense benefit in the 2018 first
quarter in connection with adopting Accounting Standards Codification
606. These decreases were partially offset by improved leverage from
higher home sales revenue and lower compensation expenses. Excluding
severance charges, the SG&A rate was 14.4%*, a 150 basis point
improvement as compared to the 2018 first quarter.

Net new home orders for the 2019 first quarter decreased 21% to 112
homes due to a slower monthly sales absorption rate, partially offset by
an increase in average selling communities. The monthly sales absorption
rate for the Company was 1.7 for the 2019 first quarter, compared to 2.8
for the prior year period. The 39% decrease in the monthly absorption
rate was due to weaker buyer demand as compared to the prior year;
however, we did see a 42% sequential increase in the monthly absorption
rate during the 2019 first quarter as compared to the 2018 fourth
quarter. We ended the 2019 first quarter with 22 active communities as
compared to 18 at the end of the 2018 first quarter, a 22% increase.

The dollar value of the Company’s wholly owned backlog at the end of the
2019 first quarter was $212.6 million and totaled 204 homes, compared to
$228.1 million and 210 homes in the prior year period. The decrease in
backlog dollar value resulted primarily from lower net new orders and a
4% lower average selling price of the homes in backlog at the end of the
2019 first quarter.

Fee Building Projects

Fee building revenue for the 2019 first quarter was $19.7 million,
compared to $43.8 million in the prior year period. The decrease in fee
revenues was largely due to lower construction activity in Irvine,
California, due to lower demand levels in that submarket. Management
fees from joint ventures and construction management fees from third
parties, which are included in fee building revenue, increased to $1.3
million for the 2019 first quarter as compared to $1.0 million for the
2018 first quarter. Our fee building gross margin for the 2019 first
quarter was $0.4 million versus $1.1 million in the prior year period.
The reduction in fee building margin was largely the result of lower fee
building revenue and a $0.4 million decrease in management fees from
joint ventures, which was partially offset by $0.7 million in
construction management fees from third parties earned in the 2019 first
quarter.

Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture income for the 2019 first quarter
was $0.2 million as compared to $0.3 million in the prior year period,
with the majority of the income generated from the Company’s Mountain
Shadows luxury community in Paradise Valley, Arizona. At the end of 2019
and 2018 first quarters, our joint ventures had six and seven actively
selling communities, respectively.

Income Taxes

The Company’s effective tax rate related to the income tax benefit for
the 2019 first quarter was 25.0% as compared to 56.9% in the 2018 first
quarter. The decrease is attributable to discrete items which resulted
in a $0.4 million benefit in the 2018 first quarter primarily related to
energy credits and a $0.3 million provision in the 2019 first quarter
related to stock compensation and state tax rate changes.

Balance Sheet and Liquidity

As of March 31, 2019, the Company had real estate inventories totaling
$563.1 million and owned or controlled 2,743 lots through its wholly
owned operations (excluding fee building and joint venture lots), of
which 1,090 lots, or 40%, were controlled through option contracts. The
Company ended the 2019 first quarter with $41.9 million in cash and cash
equivalents and $399.6 million in debt, of which $84.0 million was
outstanding under its $200 million revolving credit facility. As of
March 31, 2019, the Company had a debt-to-capital ratio of 62.8% and a
net debt-to-capital ratio of 60.1%*.

Repurchase of Senior Notes and Stock

During March 2019, the Company repurchased and retired $5.0 million of
its 7.25% Senior Notes due 2022 for a cash payment of approximately $4.5
million, which resulted in a $0.4 million pretax gain on the early
extinguishment of debt.

The Company repurchased 153,916 shares of its common stock for
approximately $1.0 million during the 2019 first quarter. The purchases
were made under a previously announced stock repurchase plan with a
remaining purchase authorization of $5.4 million as of March 31, 2019.

Guidance

The Company’s current estimate for the 2019 second quarter is as follows:

• Home sales revenue of $110 – $130 million
• Fee building revenue of $15 – $20 million
• Home sales gross margin of 12.0% – 12.5%

Conference Call Details

The Company will host a conference call and webcast for investors and
other interested parties beginning at 11:00 a.m. Eastern Time on Friday,
May 3, 2019, to review first quarter results, discuss recent events and
results, and discuss the Company’s quarterly guidance for 2019. We will
also conduct a question-and-answer period. The conference call will be
available in the Investors section of the Company’s website at www.NWHM.com.
To listen to the broadcast live, go to the site approximately 15 minutes
prior to the scheduled start time in order to register, download, and
install any necessary audio software. To participate in the telephone
conference call, dial 1-877-407-0789 (domestic) or 1-201-689-8562
(international) at least five minutes prior to the start time. Replays
of the conference call will be available through June 3, 2019, and can
be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the pass code 13689425.

* Adjusted net loss, adjusted EPS, general and administrative costs
excluding severance charges as a percentage of home sales revenue,
selling, general and administrative costs excluding severance charges as
a percentage of home sales revenue, adjusted homebuilding gross margin
(or homebuilding gross margin excluding interest in cost of home sales),
and net debt-to-capital ratio are non-GAAP measures. A reconciliation of
the appropriate GAAP measure to each of these measures is included in
the accompanying financial data. See “Reconciliation of Non-GAAP
Financial Measures.”

About The New Home Company

NWHM is a new generation homebuilder focused on the design,
construction, and sale of innovative and consumer-driven homes in major
metropolitan areas within select growth markets in California and
Arizona, including Southern California, the San Francisco Bay area,
metro Sacramento, and the greater Phoenix area. The Company is
headquartered in Aliso Viejo, California. For more information about the
Company and its new home developments, please visit the Company’s
website at www.NWHM.com.

Forward-Looking Statements

Various statements contained in this press release, including those that
express a belief, anticipation, expectation or intention, as well as
those that are not statements of historical fact, are forward-looking
statements. These forward-looking statements may include projections and
estimates concerning our revenues, community counts and openings, the
timing and success of specific projects, our ability to execute our
strategic growth objectives, gross margins, other projected results,
income, earnings per share, joint ventures and capital spending. Our
forward-looking statements are generally accompanied by words such as
“estimate,” “should,” “project,” “predict,” “believe,” “expect,”
“intend,” “anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,”
“target,” “forecast,” or other words that convey the uncertainty of
future events or outcomes. The forward-looking statements in this press
release speak only as of the date of this release, and we disclaim any
obligation to update these statements unless required by law, and we
caution you not to rely on them unduly. We have based these
forward-looking statements on our current expectations and assumptions
about future events. While our management considers these expectations
and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict
and many of which are beyond our control. The following factors, among
others, may cause our actual results, performance or achievements to
differ materially from any future results, performance or achievements
expressed or implied by these forward-looking statements: economic
changes either nationally or in the markets in which we operate,
including declines in employment, volatility of mortgage interest rates
and inflation; a downturn in the homebuilding industry; changes in sales
conditions, including home prices, in the markets where we build homes;
our significant amount of debt and the impact of restrictive covenants
in our debt agreements; our ability to repay our debt as it comes due;
changes in our credit rating or outlook; volatility and uncertainty in
the credit markets and broader financial markets; our business and
investment strategy including our plans to sell more affordably priced
homes; availability of land to acquire and our ability to acquire such
land on favorable terms or at all; our liquidity and availability, terms
and deployment of capital; changes in margin; write-downs; shortages of
or increased prices for labor, land or raw materials used in housing
construction; adverse weather conditions and natural disasters
(including wild fires and mudslides); our concentration in California;
issues concerning our joint venture partnerships; the cost and
availability of insurance and surety bonds; governmental regulation,
including the impact of “slow growth” or similar initiatives; changes
in, or the failure or inability to comply with, governmental laws and
regulations; the timing of receipt of regulatory approvals and the
opening of projects; delays in the land entitlement process,
development, construction, or the opening of new home communities;
litigation and warranty claims; the degree and nature of competition;
the impact of recent accounting standards; availability of qualified
personnel and our ability to retain our key personnel; and additional
factors discussed under the sections captioned “Risk Factors” included
in our annual report and other reports filed with the Securities and
Exchange Commission. The Company reserves the right to make such updates
from time to time by press release, periodic report or other method of
public disclosure without the need for specific reference to this press
release. No such update shall be deemed to indicate that other
statements not addressed by such update remain correct or create an
obligation to provide any other updates.

Contacts

Investor Relations
Drew Mackintosh
949-382-7838
[email protected]

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