United Homes Group, Inc ((UHG)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for United Homes Group, Inc. painted a mixed picture of the company’s current standing. While there were positive developments such as the performance of newly designed homes, cost reduction initiatives, and improved sales orders, significant challenges like a decline in revenue, lower home closings, and decreased net new orders were also highlighted. The momentum in the latter part of the quarter and various initiatives provide optimism, but the challenges in revenue and profitability metrics suggest a cautious outlook.
Newly Designed Homes Performance
The company’s newly designed homes have been a bright spot, generating margins well in excess of the company’s average in the first quarter of 2025. These homes achieved an impressive average gross margin of approximately 24%, showcasing the potential for profitability in this segment.
Cost Reduction Initiatives
United Homes Group has identified over $3.5 million in direct construction cost savings for homes expected to close in 2025. This was achieved through competitive rebidding of agreements with subcontractors and material suppliers, indicating a strategic focus on cost efficiency.
Presold Homes Strategy
The company is shifting towards more presold homes, which are producing higher margins and providing better visibility into delivery outlook. This strategy also reduces the capital tied up in standing inventory, aligning with the company’s financial optimization goals.
Improvement in Sales and Orders
April orders were up 6% year-over-year, indicating solid demand and operational momentum carried into the second quarter. This improvement suggests a positive trend in sales and orders, despite earlier challenges.
Cycle Time Reduction
Cycle time has improved by 16 days compared to last year, thanks to better labor and material availability and improved build practices. This reduction is expected to enhance operational efficiency and customer satisfaction.
Planned Community Rollout
United Homes Group plans to open 10 new communities in Q2 and 18 in Q3, which are expected to boost sales efforts. This expansion is part of the company’s growth strategy to capture more market share.
Revenue Decline
Revenue for Q1 2025 was $87 million, a decrease of $13.8 million or 13.7% from $100.8 million in Q1 2024. This decline was primarily driven by lower home closings, reflecting challenges in the market.
Lower Home Closings
Home closings for Q1 2025 totaled 252 homes, down from 311 homes in the prior year period. This decrease was impacted by a slower sales pace in January, contributing to the revenue decline.
Decreased Net New Orders
Net new orders for Q1 2025 were 296 homes, down from 384 homes in the prior year period. This drop indicates challenges in maintaining order volumes amid market fluctuations.
Gross Margin Challenges
While the gross margin improved slightly to 16.2% from 16%, the adjusted gross margin was down from 20.4% to 18.8%. This reflects elevated incentive costs and price reductions, impacting overall profitability.
Elevated Incentive Costs
Financing incentives as a percentage of ASP were 4% for the quarter, consistent with the prior quarter. These elevated incentive costs continue to impact the company’s profitability.
Forward-Looking Guidance
United Homes Group is implementing strategic initiatives, including product refreshes, a shift to presale homes, and cost reduction efforts totaling $3.5 million, which are anticipated to enhance profitability. The company expects to open 28 new communities by Q3 2025, with newly designed homes contributing to higher margins and long-term growth, particularly in the Southeast markets, despite ongoing affordability challenges and elevated incentive levels.
In summary, United Homes Group’s earnings call highlighted a mix of positive developments and challenges. While newly designed homes and strategic initiatives provide optimism, the decline in revenue and home closings suggests a cautious outlook. The company’s focus on cost reduction and presold homes strategy aims to enhance profitability and drive growth in the coming quarters.