United Homes Group - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $105.5M on 303 closings; diluted EPS was -$0.11 due to a $6.2M non-cash earn-out derivative fair value loss; gross margin rose to 18.9% (up 270 bps q/q and 100 bps y/y).
• Adjusted EBITDA was $7.2M (flat y/y vs $7.7M) as incentive levels and lower closings offset margin gains; ASP increased to ~$349k (+2.5% y/y).
• Backlog at quarter-end was 202 homes valued at ~$74.9M; liquidity was $95.2M (cash $36.5M + $58.7M revolver availability); lot pipeline ~7,300.
• Strategic alternatives review launched May 19 and remains ongoing; management expects product refresh and rebid initiatives plus new community openings to benefit H2 2025 results.

What Went Well and What Went Wrong

What Went Well

• Gross margin expanded to 18.9% (+270 bps q/q, +100 bps y/y), driven by redesigned floor plans and direct construction cost savings from the rebid initiative; adjusted gross margin reached 21.3%.
• ASP rose to ~$349k (+2.5% y/y), and management saw resilient traffic and stable sales pace (1.9 homes/community/month) despite affordability pressures.
• Liquidity strengthened to $95.2M; lot pipeline remains robust (~7,300 lots), positioning for H2 openings and growth.

Management quotes:

• “Gross margins came in at 18.9% for the quarter, representing a 270 basis point improvement over the prior quarter” — CFO Keith Feldman.
• “We continued to reap the benefits of the refreshed product initiative… We expect these initiatives… to have a more significant impact… in the second half of the year.” — CEO Jack Micenko.
• “Gross margins will be higher in 2025 compared to 2024 as a result of this product transition.” — CEO Jack Micenko.

What Went Wrong

• Closings fell 10% y/y (303 vs. 337), net new orders declined 6% y/y, and revenue decreased 4% y/y to $105.5M as higher incentives continued to weigh on profitability.
• Reported net loss of $6.3M and diluted EPS -$0.11, largely due to non-cash derivative fair value change tied to earn-out; adjusted EBITDA was roughly flat y/y ($7.2M vs. $7.7M).
• Active communities declined to 55 (from 59 a year ago), contributing to lower order volume; macro affordability headwinds persisted amid high mortgage rates.

Transcript

Speaker 1

Ladies and gentlemen, thank you for standing by, and welcome to the United Homes Group's second quarter 2025 earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one on your telephone keypad. As a reminder, today's call is being recorded. I will now hand today's call over to Erin Reeves McGinnis, General Counsel. Please go ahead.

Good morning and welcome to United Homes Group's second quarter of 2025 earnings call. Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the Federal Securities Law. United Homes Group cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. These risks and uncertainties include, but are not limited to, the risk factors described by United Homes Group in its filings with the Securities and Exchange Commission. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements.

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be accessed through the company's website and in its SEC filing. Hosting the call today are United Homes Group Chief Executive Officer Jack Micenko and Chief Financial Officer Keith Feldman. With that, I'd like to turn the call over to Jack.

Speaker 2

Thank you, Erin, and good morning to everyone joining us on the call. Home sales revenue came in at $105.5 million on 303 new home deliveries at an average sales price of $349,000. Home sales gross margin for the quarter was 18.9%, representing a 100 basis point improvement over the second quarter of 2024 and counter to the broader industry trend. Net new orders declined 5.9% year over year, primarily due to a 10% decrease in average community count. Our sales pace was relatively consistent on a year-over-year basis, coming in at 1.9 homes per community per month. Overall, I'm pleased with our company's performance this quarter as we continue to navigate changing market conditions. Demand trends during the second quarter were inconsistent as home buyers continued to weigh their desire for home ownership against the reality of high mortgage rates and concerns over affordability.

On a positive note, we saw fairly resilient traffic patterns through the quarter, both online and in our communities, which we feel is a sign that buyers in our markets remain engaged and interested in buying a home, provided it fits within their budget. We continue to offer mortgage rate buydowns and other financing incentives as a way to address affordability concerns with our buyers. Another way we combat the rising cost of home ownership is by keeping the price of our homes well below the industry average. In June, the median sales price of new homes sold in the U.S. was $402,000, an average of $501,000. This compares to United Homes Group's average sales price of $349,000 in the second quarter. Keeping our home prices affordable for the vast majority of home buyers in our markets will continue to be a focus in our communities.

Another focus for our company will be the continued rollout of our updated new home designs to each of our markets. Last year, we embarked on a company-wide review of our floor plans and product offerings and realized there was an opportunity to enhance the appeal of our homes. Since that time, we've systematically introduced refreshed product into our communities, and the response has been extremely positive. Not only has this initiative given a boost to our sales pace, it's also aided in our profitability, with gross margins on our refreshed homes trending approximately 300 basis points higher than the legacy product. We believe our gross margins will be higher in 2025 compared to 2024 as a result of this product transition. We continue to be disciplined in our approach to land acquisition, adhering to an asset-led strategy while making sure each deal meets or exceeds our underwriting criteria.

Lot costs continue to be the key driver of home price inflation as we've been successful in stabilizing and, in some cases, lowering the direct costs that go into building our home, thanks in part to the rebidding initiative we've implemented last year. We've also seen some builders walk away from land deals in our markets recently, and we're optimistic this will lead to some softening in lot costs in the future. To sum up, I'm pleased with our progress in the quarter, and I believe United Homes Group is well positioned as we head into the back half of the year. Now I'd like to turn the call over to Keith, who will provide more detail on our operational and financial results for the quarter. Keith?

Speaker 0

Thank you, Jack, and good morning. For the second quarter of 2025, we reported a net loss of $6.3 million, which includes a fair value adjustment of $6.2 million, primarily related to the accounting for the contingent earnout liability, which fluctuates each quarter based on our ending stock price. The earnout will be settled exclusively in common shares upon reaching certain stock price hurdles and will never result in a cash expense for the company. For the six months ended June 30, 2025, net income was $11.8 million, which included a change in fair value of $15 million, primarily related to the accounting for potential earnout liabilities. As Jack mentioned, revenue for the second quarter of 2025 was $105.5 million, a decrease of $3.9 million, or 3.6% from $109.4 million in the second quarter of 2024.

Revenue for the six months ended June 30, 2025 was $192.5 million compared to $210.3 million for the six months ended June 30, 2024. The year-over-year decline was primarily driven by lower home closings, partially offset by an increase in our average sales price. Home closings for the second quarter of 2025 totaled 303 homes, down from 337 homes in the prior year period. Home closings for the six months ended June 30, 2025 were 555 homes compared to 648 homes for the same period in 2024. Net new orders for the second quarter were 304 homes, down from 323 homes in the prior year period. Net new orders for the six months ended June 30, 2025 were 600 homes compared to 707 homes in 2024. Backlog as of June 30, 2025, had 202 homes representing approximately $74.9 million in value.

Gross profits for the second quarter of 2025 were $19.9 million, about $300,000 or 1.5% from $19.6 million in the prior year period. Gross margin improved by 100 basis points to 18.9% compared to the same period last year and 270 basis points compared to the first quarter of 2025. Adjusted gross margin was also up when compared to the prior year period from 20.9% to 21.3%. We believe the margin expansion is driven by the success of our refreshed floor plan portfolio and direct construction cost savings attributed to the rebidding initiative. For the six months ended June 30, 2025, gross profit was $34 million, which decreased from $35.7 million from the six months ended June 30, 2024. However, gross margin increased from 17% in the six months ended June 30, 2024 to 17.7% in the six months ended June 30, 2025.

Adjusted gross margin was 20.2% for the six months ended June 30, 2025, a slight decrease from the 20.7% from the six months ended June 30, 2024. Selling, general, and administrative expenses for the second quarter were $18 million, excluding approximately $2.2 million in stock-based compensation expense, transaction cost, and severance expense. Adjusted SG&A totaled $15.8 million or 14.9% of revenue. For the six months ended June 30, 2025, SG&A expense was $34.2 million and adjusted SG&A expense was $30 million or 15.6% of revenue. As of today, we have 55 active communities, down from 59 a year ago. As previously mentioned, new communities are expected to become available in the second half of the year, which would provide a boost to our sales efforts later in the year.

As of June 30, 2025, we controlled approximately 7,300 lots, which included a mix of owned options and land banked assets, positioning us to drive future growth and capture market opportunities. We have approximately $95.2 million of liquidity in cash and availability on our credit facility as of Q2. We remain focused on driving margin expansion, maintaining cost discipline, and supporting our growth through strategic community openings and product enhancements. That concludes our prepared remarks. Operator, please open up the line for questions.

Speaker 1

As a reminder to ask a question, press star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. At this time, there are no questions in queue. I will now hand the call back over to the presenters for any closing remarks.

Speaker 2

Okay, so there's no questions. Thank you, Tamika. We'd just like to thank everybody for their interest in United Homes Group. I hope everybody enjoys the rest of their summer and look forward to speaking with you again in the coming months. Thanks.

Speaker 1

This concludes today's call. Thank you for joining. You may now disconnect your lines.