Q2 2021 Harbor Custom Development Inc Earnings Call
Thank you for standing by and welcome to the Harbor Custom Development, Inc. Second quarter 2021 conference call. At this time all participants are in a listen only mode. A pre submitted question and answer session will follow the formal presentation.
Minder This conference is being recorded.
Now like to turn the conference over to your host Gelling Griffin CEO, President and chairman of the Board of Harbor Custom Development, Inc.
Thank you operator, and thanks to all of you for joining us today and welcome to Harbor custom development second quarter earnings Conference call. Our earnings press release was distributed yesterday and can be viewed in the Investor Relations section of the Harbor website under the sub head or press releases news at Www Dot Harbor.
Custom homes Dot com.
Before we begin I would like to remind you that today's call may include statements that constitute forward looking statements such statements involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those forward looking statements and we assume no obligation to update them.
As you've already seen in our press release yesterday, we had a very productive and profitable second quarter, we met or exceeded our expectations on every front.
Highlights of the second quarter and first half results.
Our real estate assets have increased to $85.2 million as of June 30th 2021 from $20.4 million as of December 31, 2020. This increase was due to an increase in the number of houses under construction and the purchase of additional developed and undeveloped lot inventory.
Revenues increased by approximately 54% to $28 million for the six months ended June 30th 2021 as compared to $18 million for the six months ended June 32020 are.
Our revenue increase in 2020, one was due to a land development sale of $7 million to Lamar sale of entitled Land of $9.3 million to Lamar and fee building come up $1.3 million.
Our overall gross profit margin was 14% for the six months ended June 30th 2021 compared to 6% for the six months ended June 30 of 2024.
For the six months ended June 30th 'twenty, 'twenty, one and 2020 the average gross margin for homes closed was 18% and 6% respectively.
Our operating expenses increased by 87% to $4.3 million for the six months ended June 32021, as compared to $2.3 million for the six months ended June 30th 2020.
The increase in total operating expenses is primarily attributable to the following.
Insurance of 828000 stock compensation expense of 230000 Investor relations costs of 202000, primarily driven by establishing and maintaining public company infrastructure and oversight dipped.
Depreciation expense of 197000 related to equipment additions and increased payroll of 321000, driven by a combination of new hires and salary increases for existing employees.
Other expenses increased by 4% to 97000 for the six months ended June 32021, as compared to 93000 for the six months ended June 30th 2020.
For the six months ended June 30th 2021 we incurred 183000 of interest expense related to our financing arrangements as compared to 90000 for the six months ended June 30th 2020. In addition, we recorded 36000 of loss on the sale of equipment for the six months ended June 30th 2021 as compared to 15000.
For the six months ended June 30th 2020.
Net cash used in operating activities for the first half of 2021 was $61 million compared to 3 million for the first half of 2020. The increase is primarily due to the acquisition and development of real estate assets of $63 million in 2021, and 2 million for the same period in 2020.
Net cash used in investing activities for the six months ended June 32021 was 106000 as compared to net cash provided of 176000 for the six months ended June 30th 'twenty 'twenty for the six months ended June 32020, 175000 was used for the acquisition of new property and equipment and they were proceeds for.
The sale of equipment of 69000.
For the six months ended June 30th 'twenty 'twenty 322000 was used for the acquisition of new property and equipment and they were proceeds from the sale of equipment of 145000.
Net cash provided from financing activities for the six months ended June 30, 2021 and 'twenty 'twenty was $72 million and 3 million respectively. The increase was primarily due to 25 million issuance of common stock plus $29 million of issuance of preferred stock and $17 million of new construction loans.
As of June 30th 'twenty, 'twenty, one our cash balance was $13 million compared to 332000 as of December 31.2020.
For the six months ended June 30th 'twenty, 'twenty, one and 'twenty 'twenty, we had a net loss of 480000 and a net loss of one 4 million respectively. The decrease in net loss was primarily attributable to an increase in revenue and improved gross margins in 2020 one.
We have turned the corner and achieve profitability during the second quarter of 2021.
If the current favorable real estate market conditions continue we anticipate operating profitably on an annual basis for the foreseeable future.
As Chief Executive Officer, I'm thrilled with the momentum we gained over the past six months, which serves as further validation of our development approach, we're able to serve multiple segments of the home buying market. While also providing developed lot inventory for national public builders, which provides the company a steady and diverse stream of revenue.
With a business strategy rooted in disciplined analysis agility and highly efficient operations. We are well positioned for continued growth I'm very proud of our employees diligent work that has led to significant progress across all segments of our business as a result, our objective in 2020 one is to lead our comparable public company peers and <unk>.
Gross margin percentage and EBITDA growth.
Regarding the state of the housing market almost every major metropolitan market in the U S is defined by a significant shortage of housing inventory.
Our business model that is focused on land acquisition within a 30 to 60 minute commute to the fastest growing metro markets in the country has been propel to new heights by urban flight co.
COVID-19 created a mass exodus from major cities to the suburbs and rural areas and our projects have benefited directly from both the retail consumer sale of homes and sale of developed lots to national public builders.
As such we will continue to look for expansion opportunities in the fastest growing U S Metro markets.
We are currently active in the Seattle, Sacramento, Austin, Vancouver, B C and Cape Coral Fort Myers Metro markets.
We previously provided guidance that we will generate approximately 80 million in revenues in 2020, one which would equate to a 59% increase over 2020. We also provided guidance that our projected revenues for 2022 will follow a similar growth trajectory with an estimated 128 million in sales or a 60% annual increase.
We intend on adjusting our 2022 revenue guidance upwards at the end of the third quarter and will provide more detailed information at that time.
And with that we will go to the question and answer session. In addition to asking live questions by telephone you can also submit questions in writing to IR at Harbor custom Deb Dot com.
Thank you.
Thank you we will now turn to management for our previously submitted questions. If there are any additional questions. You may follow up with management following today's call.
The first question your topline and gross margin guidance suggests a strong second half of the year can you discuss your confidence level on that and does your previous revenue guidance of $120 million in Q2 in 2022 still hold.
We address that slightly a little earlier, but we do anticipate having solid third and fourth quarters with net income in both quarters exceeding our second quarter numbers for.
Our year end gross revenues per our previous guidance, we anticipate approximately $80 million in total sales for 2021.
The second part of the question asked of our 2022 guidance still stands and although we will provide more clarity at a later date. Our objective is to double our 2021 revenues to $160 million in 2022.
The second question is do you see growth opportunities in your existing markets or should we expect to see your footprint increase into other cities.
There are growth opportunities in our existing markets. In addition, we continually look for new expansion opportunities in the fastest growing areas of the country and we'll continue to do so for the foreseeable future.
The third question is have you seen buyer demand taper off as prices have risen in the Austin and Seattle Metro markets.
These two markets have extreme shortages of inventory and as a result available product that becomes available as quickly purchased today, we have no finish standing inventory available in either market.
Yeah.
The fourth question is how are you dealing with COVID-19 related supply chain disruptions and what impact does it have on your business.
We've been fortunate in that the supply chain disruptions, we have experienced have been relatively minor to date the impacts to our business from supply chain issues are typically schedule related.
And that is the last of our questions.
Thank you everybody for participating in today's call.
We look forward to providing additional updates in the near future I will also be delivering a presentation tomorrow at 930 Pacific time at the virtual Investor Summit. So I hope you can join US tomorrow in the meantime, if you have any questions. We can be reached at 866, 700, 440, $97 four or IR at Harbor custom Dev.
Dot com.
Stay safe and well.
Right.
Yeah.
This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Okay.