United Homes Group, Inc. Reports 2024 First Quarter Results

COLUMBIA - United Homes Group, Inc. (the 'Company') (NASDAQ: UHG) today announced results for the first quarter ended March 31, 2024.

First Quarter 2024 Operating Results

For the first quarter 2024, net income was $24.9 million, or $0.44 per diluted share, which included change in fair value of derivative liabilities of $26.4 million, with that change predominantly due to changes in fair value on potential earn-out consideration due to fluctuation in the stock price during the measurement period, representing a non-cash expense item. The earnout consideration would be paid in common shares upon reaching certain stock price hurdles. The Company is required to record the fair value of this earnout as derivative liabilities on the Condensed Consolidated Balance Sheets and to record changes in fair value of derivative liabilities on the Condensed Consolidated Statements of Operations, in each case until UHG shares reach certain predetermined values or expiration of the five year earnout period. Net loss for the first quarter 2023 was $(204.5) million, or $(5.44) per diluted share. Total Stockholders' equity for the first quarter 2024 was $(4.7) million. Adjusted book value1, which excludes the derivative liability and goodwill, was $87.2 million.

'United Homes Group made progress on a number of fronts in the first quarter of 2024, as we continued to set the foundation for our long-term expansion plans and established relationships that will allow us to execute on our land-light operating strategy,' said Michael Nieri, Chief Executive Officer of United Homes Group. 'We entered into agreements with a number of strategic partners that will take much of the risk and capital associated with land development off our hands, allowing us to focus on the business of building and selling homes.'

Mr. Nieri continued, 'Homebuilding conditions continue to be favorable in our markets, as the combination of low existing home inventory and strong employment trends has resulted in steady traffic at our communities. While the volatile interest rate environment has created some uncertainty with buyers, we have addressed affordability concerns through the use of financing incentives. Net orders came in at 384 for the quarter, suggesting that demand trends are staying consistent as we move through the spring selling season.'

Revenues for the first quarter 2024 were $100.8 million, compared to $94.8 million in the first quarter 2023. Home closings during the first quarter 2024 were 311 compared to 328 in the first quarter 2023. Net new home orders during the first quarter 2024 were 384 compared to 389 in the first quarter 2023. ASP of 286 production-built homes (which excludes 25 general contractor, custom, and build to rent homes) closed during the first quarter 2024 was approximately $335,000, compared to $314,000 during the first quarter 2023 for 294 production-built homes (which excludes 34 general contractor and custom homes), representing a 6.7% increase.

Adjusted book value is a non-GAAP financial measure. See 'Reconciliation of Non-GAAP Financial Measures.'

Gross profit percentage during the first quarter of 2024 was 16.0% compared to 17.7% during the first quarter 2023. Adjusted gross profit percentage2 in the first quarter 2024 was 20.4%, compared to 20.2% in the first quarter 2023. UHG's quarter-over-quarter gross profit percentage decreased as the Company continued to navigate a volatile interest rate market by offering attractive sales incentives to homebuyers primarily in the form of interest rate buydowns. In addition, gross profit percentage was negatively impacted this quarter by purchase accounting adjustments related to closings on inventory from acquisitions and increased interest expense.

Selling, general and administrative expenses ('SG&A') as a percentage of revenues was 16.9% in the first quarter 2024, which included $1.5 million of stock-based compensation and $1.2 million of transaction related expenses. Excluding these stock-based compensation and transaction related expenses, Adjusted SG&A3 for the first quarter 2024 was 14.2% of revenues.

Adjusted EBITDA4 during the first quarter 2024 was $7.3 million compared to $8.5 million during the first quarter 2023.

Business Acquisitions

Creekside Custom Homes Acquisition

On January 26, 2024, the Company completed the acquisition of the homebuilding assets of Creekside Custom Homes, LLC ('Creekside') (the 'Creekside Acquisition') for $12.7 million in cash. The acquisition allows UHG to further expand its presence in the coastal region of South Carolina, particularly in Myrtle Beach, SC.

About United Homes Group, Inc.

UHG is a publicly traded residential builder headquartered in Columbia, SC. The company focuses on southeastern markets with 63 active communities in South Carolina, North Carolina and Georgia.

UHG employs a land-light operating strategy with a focus on the design, construction and sale of entry-level, first move up and second move up single-family houses. UHG currently designs, builds and sells detached single-family homes, and, to a lesser extent, attached single-family homes, including duplex homes and town homes in three major market regions in South Carolina: Midlands, Upstate, and Coastal, and also has a presence in Georgia and North Carolina. UHG seeks to operate its homebuilding business in high-growth markets, with substantial in-migrations and employment growth.

Under its land-light lot operating strategy, UHG controls its supply of finished building lots through lot purchase agreements with third parties and related parties, including its Land Development Affiliates, which provide UHG with the right to purchase finished lots after they have been developed by the applicable third party or related party. This land-light operating strategy provides UHG with the ability to amass a pipeline of lots without the same risks associated with acquiring and developing raw land.

As UHG reviews potential geographic markets into which it could expand its homebuilding business, either organically or through strategic acquisitions, it intends to focus on selecting markets with positive population and employment growth trends, favorable migration patterns, attractive housing affordability, low state and local income taxes, and desirable lifestyle and weather characteristics.

Forward-Looking Statements

Certain statements contained in this earnings release, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the 'Securities Act') and Section 21E of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as 'may,' 'will,' 'expect,' 'intend,' 'anticipate,' 'estimate,' 'believe,' 'seek,' 'continue,' or other similar words.

Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results. Such statements include, but are not limited to, statements about our future financial performance, strategy, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: disruption in the terms or availability of mortgage financing or an increase in the number of foreclosures in our markets; volatility and uncertainty in the credit markets and broader financial markets; a slowdown in the homebuilding industry or changes in population growth rates in our markets; shortages of, or increased prices for, labor, land or raw materials used in land development and housing construction, including due to changes in trade policies; material weaknesses in our internal control over financial reporting that we have identified, which, if not corrected, could affect the reliability of our consolidated financial statements; our ability to recognize the anticipated benefits of the business combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably; our ability to execute our business model, including the success of our operations in new markets and our ability to expand into additional new markets; our ability to successfully integrate homebuilding operations that we acquire; delays in land development or home construction resulting from natural disasters, adverse weather conditions or other events outside our control; changes in applicable laws or regulations; the outcome of any legal proceedings; our ability to continue to leverage our land-light operating strategy; the ability to maintain the listing of our securities on Nasdaq or any other exchange and the possibility that we may be adversely affected by other economic, business or competitive factors.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release and are not intended to be a guarantee of our performance in future periods. We cannot guarantee the accuracy of any such forward-looking statements contained in this release, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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