Build A BetterLife · 2020. 9. 21. · Build A BetterLife Investor Presentation September 2020....
Transcript of Build A BetterLife · 2020. 9. 21. · Build A BetterLife Investor Presentation September 2020....
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Build A Better Life
Investor PresentationSeptember 2020
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This presentation contains forward-looking
statements within the meaning of the Private
Securities Litigation Reform Act of 1995
related to management’s expectations about
future conditions. Actual business, market or
other conditions may differ materially from
management’s expectations and, accordingly,
may affect our sales and profitability or other
results and liquidity. Actual results may differ
materially due to various other factors,
including: economic changes either
nationally or in the markets in which we
operate, including declines in employment,
levels of volatility in mortgage interest rates
and inflation; continued or increased
downturn in the homebuilding industry;
continued volatility and uncertainty in the
credit markets and broader financial markets;
our limited operating history; our future
operating results, financial condition and
liquidity; our business operations; changes in
our business and investment strategy;
availability of land to acquire and our ability to
acquire such land on acceptable terms or at all;
availability, terms and deployment of capital;
continued or increased disruption in the
availability of mortgage financing or the
number of foreclosures in the market; shortages
of or increased prices for labor, land or raw
materials used in housing construction; delays
in land development or home construction
resulting from adverse weather conditions or
other events outside our control; issues
concerning our joint venture partnerships; the
cost and availability of insurance and surety
bonds; 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; the
degree and nature of our competition; our
leverage and debt service obligations; restrictive
covenants relating to our operations in our
current or future financing arrangements; and
availability of qualified personnel and our
ability to retain our key personnel. You should
not rely upon forward-looking statements as
predictions of future events. Although our
management believe that the expectations
reflected in our forward-looking statements
are reasonable, we cannot guarantee that the
future results, levels of activity, performance
or events and circumstances described in the
forward-looking statements will be achieved
or occur. These forward-looking statements
speak only as of the date of this presentation.
We assume no obligation to update any
forward-looking information contained in
this presentation. Additional information
concerning these and other factors may be
found in our filings with the Securities and
Exchange Commission, including the “Risk
Factors” in our most recent Annual Report
on Form 10-K.
Disclaimer
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Executive Team
Relevant Experience
• Former CEO, The New
Home Company (2009-2019)
• Founder, The New Home
Company (2009-Present)
• Former Co-Chief
Restructuring Officer of
Land Source (2008-2009)
• Former CEO of John Laing
Homes (1995-2008)
Larry Webb
Executive Chairman
• The New Home Company
(2015-Present)
• Former CFO of M.D.C.
Holdings, Inc. (2012-2015)
• Former CFO of Standard
Pacific Corp. (2009-2011);
Also former SVP, Treasurer &
Corporate Controller
(1996-2009)
John Stephens
EVP & Chief Financial Officer
• Transitioned to CEO role
effective August 30, 2019
• Former COO, The New
Home Company (2017-2019)
• Former California Regional
President for Richmond
American Homes, a
subsidiary of M.D.C.
Holdings, Inc. (2004-2017)
Leonard Miller
President & Chief Executive Officer
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The New Home Company OverviewNew generation homebuilder founded in 2009• Different by design
• Initial capital from founders
• IPO in 2014
Focus on premier locations in high-growth, land-constrained markets; California focus with expansion into Arizona
Broad and flexible product capabilities with an established high-end segment and a recent emphasis on more affordable price segments
Strong relationships with land sellers/developers and trade partners
Award-winning homes and communities; expertise in design and architecture
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Home Sales Revenue
Wholly Owned Lots Owned & Controlled
Note: All data as of 6/30/20. Home sales revenue for the last twelve months ended 6/30/20
West Coast Focused
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Actively Selling Communities in Southern
California, Northern California, and Arizona Arizona
Southern
California
Northern
California
36%
34% 29%
2,239
Lots
Arizona
Southern
California
Northern
California
12%
55%
$466M
33%
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Recent Events$124M LTM operating cashflow led to $80M debt paydown and reduced
Q2’20 net debt-to-capital
ratio to 51.5% from 60.1%
high watermark in Q1’19
(860 bps reduction)
Strong July and August absorption pace resulted
in a 100% increase in net
orders for the first two
months of Q3 compared
to the prior year
Right-sized overhead cost structure through
more efficient sales &
marketing spending
and lower personnel
costs
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2.0 2.2
3.2 3.4
18% (8%) 88% 64%
Q1'20 Q2'20 Jul'20 Aug'20
Monthly Absorption Pace
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Year-Over-Year
Change %
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The New Home Company Update
25Actively Selling Communities
534Deliveries
$466mmHome Sales Revenue
$37mmAdj. EBITDA
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$873kASP
2,239Lots Owned & Controlled
Note: All data for last twelve months as of 6/30/2020 except actively selling communities and lots owned and controlled which are as of 6/30/2020.
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New Home’s Investment Highlights
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1 Premium brand rewarded for
customer service, quality and design
2 Strategically positioned in highly
attractive submarkets
3 Diversified product offering
Focused on cash flow generation
and reducing leverage
4
Fee business leverages overhead
and adds supplemental profits
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Repositioned balance sheet with
focus on margin improvement
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Premium Brand
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• The New Home Company is a Premium Brand and will leverage its
expertise across product segments
• New Home has expanded its portfolio to include more affordable product
offerings in strong locations, but remains committed to its premium brand
through The New Home Difference:
NWHM credo social graphics
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Highly Attractive Submarkets
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• The New Home Company will leverage its Premium Brand where it can be rewarded for
its expertise:
Well located, highly
amenitized master
plan communities
o Southern CA: Irvine, Rancho Mission Viejo, Great
Park, Civita, Bedford
o Northern CA: Russell Ranch & Whitney Ranch
o AZ: Eastmark & Estrella
Exceptional locations
o Southern CA: Coastal & Inland Empire “A” Markets
o Northern CA: Clover Valley, Granite Bay, Urban
Sacramento & Rocklin
o AZ: Central, Southeast & Southwest Valleys
Placemaking:
Mini-Master Plans
o Southern CA: Lambert Ranch & Parkside
o Northern CA: McKinley Village
o AZ: Mosaic & Mariposa
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Recent New Community Successes
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➢ 60 homesites priced in the $1.0M range (2,500 sq. ft.)
➢ Opened in late March without a grand opening event
➢ Utilized virtual tours, social media and online sales concierge, as well as
highly personalized private tours, to present the model homes
➢ Monthly absorption of 6.3 homes per month since opening late March
Sterling (Rancho Mission Viejo, CA)
Amenitized
MP
Exceptional
Location
Placemaking
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➢ Grand Opening event in late February
➢ 2nd Move Up Community with $900k ASP in Sacramento area
➢ Sold consistently at an absorption pace of 2.9 homes per month even through
stay-at-home order
Silver Crest (Folsom, CA)
Recent New Community Successes Amenitized
MP
Exceptional
Location
Placemaking
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➢ NWHM’s first entry level community in AZ ($350k ASP)
➢ Medium-Density Mini Master Plan
➢ 3 Product Types totaling 222 homes: Row Towns, Backyard Towns and Flats
➢ Sold 54 homes since models completed in late May (4.5/month per product line)
Mosaic (Gilbert, AZ)
Recent New Community Successes Amenitized
MP
Exceptional
Location
Placemaking
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($29M) ($32M)
($74M)
($4M)($12M)
$31M$40M
$63M
$17M$5M
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20
LTM Operating Cash Flow: $124MLTM Operating Cash Flow: -$59M
Focus on Cash Flow Generation
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Op
erat
ing
Cas
h F
low
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$2.7
$5.1
$7.5 $7.4$6.7
$4.0
2014 2015 2016 2017 2018 2019
Fee Building Contribution Margin1
➢ Leverages overhead and generates supplemental income using
nominal capital• Increases market scale
• Strengthens purchasing power
➢ Current emphasis is on growing fee business with other land owners
($ in Millions)
(1) Excludes joint venture management fees.
206 537 644 820 600 309
Deliveries
Fee Building Adds Supplemental Profits
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Recent Financial Performance
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Q2 2020 YTD Financials
(1) For reconciliation of this non-GAAP financial measure, see appendix.(2) Adjusted homebuilding GM% excludes interest in COS and impairments, if any. For reconciliation of this non-GAAP financial measure, see appendix.. 18
YTD Q2
2020
YTD Q2
2019
YoY
Growth %
Operating Statistics
Monthly Absorption 2.1 2.0 5%
Net Orders 296 266 11%
Ending Community Count 25 20 25%
Backlog 235 207 14%
Backlog ASP $718k $974k (26%)
Deliveries 210 250 (16%)
Deliveries ASP $826k $959k (14%)
(Do llars in millions)
Financial Statistics
Home Sales Revenue $173.4 $239.7 (28%)
Land Sales Revenue $0.2 - 100%
Fee Revenue $57.4 $41.9 37%
Total Revenue $231.0 $281.6 (18%)
Homebuilding GM% (excl. imp.) 1 13.0% 12.3% 70 bps
Adj. Homebuilding GM% 2 19.2% 17.0% 220 bps
SG&A% (excl. restructuring) 14.9% 12.4% 250 bps
Adjusted EBITDA 1 $13.4 $17.9 (25%)
LTM Adjusted EBITDA 1 $36.9 $46.5 (21%)
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(Do llars in millions)
Jun 30,
2020
Dec 31,
2019
Assets
Cash $85.7 $79.4
Inventory $370.9 $433.9
JV Investment $12.9 $30.2
Total Assets $541.6 $603.2
Liabilities & Equity
Revolver - -
Senior Notes, net $295.1 $304.8
Total Debt $295.1 $304.8
Total Liabilities $344.5 $370.4
Total Equity $197.0 $232.6
➢ $298M senior notes due Apr’22
• Repurchased $27M starting in
Q1’19
➢ $60M unsecured revolving credit
facility
• Extended maturity to Sep’21
(1) For reconciliation of this non-GAAP financial measure, see appendix. (2) Excludes Joint Venture investment
Balance Sheet
19
Jun 30,
2020
Dec 31,
2019Change
Metrics
Debt-to-Capital 60.0% 56.7% 330 bps
Net Debt-to-Capital (1) 51.5% 49.2% 230 bps
Debt-to-LTM Adj. EBITDA(1) 8.0x 7.4x 0.6x
Net Debt-to-LTM Adj. EBITDA(1) 5.7x 5.4x 0.2x
LTM Interest Coverage 1.4x 1.4x (0.0x)
Cash & Inventory to Debt(2) 1.5x 1.7x (0.1x)
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Conclusion
Diversified Product Offering
Highly Attractive Sub-Markets
Focused on Cash Flow Generation
Premium Brand
Fee Business Adds Supplemental Income
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Repositioned Balance Sheet
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Appendix
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Active Wholly Owned CommunitiesSouthern California
(1) Homes not closed as of June 30, 2020(2) Actual revenue may vary
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Future ASP Remaining
($ in 000's) Homes(1 )
Agave Brea $690 80 24
Cobalt Rancho Mission Viejo $620 72 12
Marywood Orange $1,930 40 9
Parson Corona $490 96 49
Promontory Bluffs San Diego $1,170 40 10
Promontory Heights San Diego $800 93 36
Nova Rancho Cucamonga $400 135 131
Seabluff Playa Vista $1,180 75 6
Seville Ontario $600 75 10
Sky Ranch Ladera Ranch $2,770 28 3
Sterling Rancho Mission Viejo $1,020 60 60
Whitney Corona $640 41 17
$680 835 367
Homes
Southern
California
LocationProject
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Future ASP Remaining
($ in 000's) Homes(1)
Bristol Vacaville $600 64 44
Gala Davis $600 120 60
Canyon View Rocklin $850 92 34
Ellison Park Milpitas $1,250 114 17
Nuvo at Artisan Square Natomas $340 145 145
Oxford Vacaville $630 80 59
Park View Rocklin $570 60 32
Preston Vacaville $530 87 69
Sheffield Vacaville $570 120 106
Silver Crest Folsom $910 108 104
Tidewater Lathrop $610 131 21
$610 1121 691
Belmont Gilbert $1,300 53 1
Icon Scottsdale $1,270 26 12
Mosaic Row Towns Chandler $330 87 87
Mosaic Backyard Towns Chandler $380 69 69
Mosaic Flats Chandler $360 66 66
$400 301 235
Northern
California
Arizona
Location HomesProject
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(1) Homes not closed as of June 30, 2020(2) Actual revenue may vary
Active Wholly Owned CommunitiesNorthern California and Arizona
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Future Wholly Owned Communities
(1) Actual base pricing may vary.
Est. Average Base Price (1 )
($ in 000's)
Nuvo at Piemonte Attached Ontario Q3'21 $430 72
Nuvo at Parkside Paseo Detached Ontario Q4'21 $410 90
Nuvo at Parkside 2 Story Sm Detached Ontario Q4'21 $370 50
Nuvo at Parkside 2 Story Lrg Detached Ontario Q4'21 $420 111
Nuvo at Parkside 8 Pack Detached Ontario Q4'21 $460 52
$420 375
Gold Hill Detached Folsom Q4'20 $820 77
Eureka Grove Detached Granite Bay Q3'21 $700 72
$760 149
Mariposa Cottages Detached Chandler Q3'20 $430 55
Mariposa Courts Detached Chandler Q3'20 $370 38
Mariposa Towns Attached Chandler Q3'20 $330 106
Centella at Estrella Detached Goodyear Q3'20 $320 80
Element at Eastmark Detached Mesa Q2'21 $310 135
$340 414
$440 938
HomesEstimated
Opening
Arizona
Project Location
Southern
California
Product
Northern
California
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Historical Financial Summary($ in Millions, except Delivery ASP and Homebuilding GM per Delivery)
(1) For reconciliation of these non-GAAP financial measures, reference the appendix. (2) Includes homebuilding, land sales and JV investment impairments
2014 2015 2016 2017 2018 2019
Net New Orders 79 174 253 412 536 532
Active Community Count 4 10 15 17 20 21
Deliveries (Homebuilding) 53 148 250 341 498 574
Delivery ASP (000s) $1,058 $1,893 $2,032 $1,645 $1,012 $927
Home Sales Revenue $56.1 $280.2 $507.9 $560.8 $504.0 $532.4
Growth % 57% 400% 81% 10% -10% 6%
Land Sales Revenue - - - - - $41.7
Fee Building Revenue $93.6 $149.9 $186.5 $190.3 $163.5 $95.3
Total Revenue $149.7 $430.1 $694.5 $751.2 $667.6 $669.3
Growth % 80% 187% 61% 8% -11% 0%
Homebuilding GM $9.3 $45.0 $72.0 $85.4 $57.5 $54.5
Homebuilding GM % 16.5% 16.1% 14.2% 15.2% 11.4% 10.2%
Adjusted Homebuilidng GM (1)
$9.8 $47.5 $79.7 $98.7 $86.2 $89.1
Adjusted Homebuilidng GM % (1)
17.4% 16.9% 15.7% 17.6% 17.1% 16.7%
Homebuilding GM per Delivery (000s) $174.5 $303.9 $288.2 $250.5 $115.5 $94.9
Adjusted Homebuilding GM per Delivery (000s) (1) $184.6 $320.9 $318.9 $289.4 $173.0 $155.2
Impairments (2) - - $3.5 $2.2 $30.0 $13.7
Fee Building GM $4.5 $10.2 $8.4 $5.5 $4.4 $2.1
Fee Building GM % 4.8% 6.8% 4.5% 2.9% 2.7% 2.2%
JV Income $8.4 $13.8 $7.7 $0.9 -$19.7 -$3.5
SG&A $16.4 $34.0 $52.6 $59.0 $62.0 $62.1
SG&A as a % of Home Sales Revenue 29.2% 12.1% 10.4% 10.5% 12.3% 11.7%
Adjusted EBITDA (1) $6.6 $46.2 $43.1 $50.1 $39.9 $41.4
Pretax Income $5.0 $33.9 $33.9 $32.5 -$20.3 -$11.8
Net Income $4.8 $21.7 $21.0 $17.2 -$14.2 -$8.0
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Reconciliation of Non-GAAP Financial Measures
The following table reconciles the Company’s ratio of debt-to-capital to the ratio of net debt-to-capital. We believe
that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the
leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.
(1)The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt by the sum of total notes payable plus equity, exclusive of noncontrolling interest.
(2)The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is notes payable less cash to the extent necessary to reduce the debt
balance to zero) by net total capital, exclusive of noncontrolling interest. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the
ratio of net debt-to-net capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain
financing. We believe that by deducting our cash from our notes payable, we provide a measure of our indebtedness that takes into account our cash liquidity. We believe this
provides useful information as the ratio of debt-to net capital does not take into account our liquidity and we believe that the ratio net of cash provides supplemental
information by which our financial position may be considered. Investors may also find this to be helpful when comparing our leverage to the leverage of our competitors that
present similar information.
June 30, December 31,
2020 2019
Total Debt 295,124$ 304,832$
Equity, exclusive of non-controlling interest 196,966 232,647
Total capital 492,090$ 537,479$
Ratio of debt-to-capital (1) 60.0% 56.7%
Total Debt 295,124$ 304,832$
Less: cash. cash equivalents and restricted cash 85,732 79,431
Net debt 209,392 225,401
Equity, exclusive of non-controlling interest 196,966 232,647
Total capital 406,358$ 458,048$
Ratio of net debt-to-capital (2) 51.5% 49.2%
(Dollars in thousands)
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Reconciliation of Non-GAAP Financial Measures
See the table below reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.
(1)Homebuilding gross margin before impairments and adjusted homebuilding gross margin are non-GAAP financial measures. We believe this information is meaningful as it
isolates the impact that home sales impairments and leverage have on homebuilding gross margin and permits investors to make better comparisons with our competitors who
also break out and adjust gross margins in a similar fashion.
27
Quarter Ended June 30, Year Ended December 31,
2020 % 2019 %
Home sales revenue 77,757$ 100.0% 140,464$ 100.0%
Cost of home sales 85,216 109.6% 123,525 87.9%
Homebuilding gross margin (7,459) -9.6% 16,939 12.1%
Add: Home sales impairment 19,000 24.4% - 0.0%
Homebuilding gross margin before impairments (1) 11,541 14.8% 16,939 12.1%
Add: interest in cost of home sales 4,601 6.0% 6,301 4.4%
Adjusted homebuilding gross margin 16,142$ 20.8% 23,240$ 16.5%
Year Ended December 31,
2019 % 2018 % 2017 % 2016 % 2015 % 2014 %
Home sales revenue 532,352$ 100% 504,029$ 100% 560,842$ 100% 507,949$ 100% 280,208$ 100% 56,094$ 100%
Cost of home sales 477,857 89.8% 446,530 88.6% 475,413 84.8% 435,909 85.8% 235,231 83.9% 46,843 83.5%
Homebuilding gross margin 54,495 10.2% 57,499 11.4% 85,429 15.2% 72,040 14.2% 44,977 16.1% 9,251 16.5%
Add: Home sales impairment 8,300 1.6% 10,000 2.0% 2,200 0.4% 2,350 0.5% - 0.0% - 0.0%
Homebuilding gross margin before impairments (1) 62,795 11.8% 67,499 13.4% 87,629 15.6% 74,390 14.6% 44,977 16.1% 9,251 16.5%
Add: interest in cost of home sales 26,304 4.9% 18,678 3.7% 11,052 2.0% 5,331 1.0% 2,511 0.9% 532 0.9%
Adjusted homebuilding gross margin 89,099$ 16.7% 86,177$ 17.1% 98,681$ 17.6% 79,721$ 15.7% 47,488$ 16.9% 9,783$ 17.4%
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Reconciliation of Non-GAAP Financial Measures
A reconciliation of net income attributable to us to adjusted EBITDA, adjusted EBITDA margin percentage and the ratio of
adjusted EBITDA to total interest incurred is provided in the following table:
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LTM June 30, Quarter Ended June 30, Year Ended December 31,
2020 2019 2020 2019
($ in Thousands) ($ in Thousands)
Net income (40,374)$ (14,090)$ (24,293)$ 1,591$
Add:
Interest amortized to cost of sales and other expense 28,817$ 23,317 5,872 6,301
Provision for income taxes (30,991)$ (4,972) (16,929) 974
Depreciation and amortization 7,538$ 9,027 1,778 2,386
Amortization of equity-based compensation 2,281$ 2,475 521 523
Cash distributions of income from unconsolidated joint ventures 95$ 279 - 19
Severance charges 1,091$ 1,788 1,091 -
Non-cash impairments & adandonments 43,405$ 10,182 19,094 14
Less:
Gain from early extinguishment of debt (774)$ (969) (702) (552)
Gain from notes payable principal reduction -$ - - -
Income from unconsolidated joint ventures 25,771$ 19,499 19,962 (185)
Adjusted EBITDA 36,859$ 46,536$ 6,394$ 11,071$
Total Revenue 618,745$ 670,377$ 98,960$ 162,749$
Adjusted EBITDA margin percentage 6.0% 6.9% 6.5% 6.8%
Interest Incurred 25,982$ 30,416$ 6,150$ 7,606$
Ratio of adjusted EBITDA to total interest incurred 1.4x 1.5x 1.0x 1.5x
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Reconciliation of Non-GAAP Financial Measures
A reconciliation of net income attributable to us to adjusted EBITDA, adjusted EBITDA margin percentage and the ratio of
adjusted EBITDA to total interest incurred is provided in the following table:
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Year Ended December 31,
2019 2018 2017 2016 2015 2014
($ in Thousands) ($ in Thousands)
Net income (8,001)$ (14,230)$ 17,141$ 20,926$ 21,378$ 4,757$
Add:
Interest amortized to cost of sales and other expense 27,234 19,908 11,057 5,331 2,511 532
Provision for income taxes (3,815) (6,075) 15,390 13,024 12,533 246
Depreciation and amortization 8,957 6,631 449 511 473 381
Amortization of equity-based compensation 2,260 3,090 2,803 3,471 3,884 2,322
Cash distributions of income from unconsolidated joint ventures 374 715 1,588 3,742 18,477 6,040
Severance charges 1,788 - - - - -
Non-cash impairments & adandonments 10,294 10,206 2,583 4,080 635 754
Less:
Gain from early extinguishment of debt (1,164) - - - - -
Gain from notes payable principal reduction - - - (250) - -
Income from unconsolidated joint ventures 3,503 19,653 (866) (7,691) (13,767) (8,443)
Adjusted EBITDA 41,430$ 39,898$ 50,145$ 43,143$ 46,124$ 6,589$
Total Revenue 669,349$ 667,566$ 751,166$ 694,456$ 430,099$ 149,657$
Adjusted EBITDA margin percentage 6.2% 6.0% 6.7% 6.2% 10.7% 4.4%
Interest Incurred 28,819$ 28,377$ 21,978$ 7,484$ 4,722$ 1,857$
Ratio of adjusted EBITDA to total interest incurred 1.5x 1.4x 2.3x 5.8x 9.8x 3.5x
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