Harbor Custom Development, Inc. Reports 2021 Third Quarter Results
GIG HARBOR, Wash., Nov. 15, 2021 (GLOBE NEWSWIRE) -- Harbor Custom Development, Inc. (“Harbor,” “Harbor Custom Homes®,” or the “Company”), (NASDAQ: HCDI; HCDIP; HCDIW, HCDIZ), an innovative and market leading real estate company involved in all aspects of the land development cycle, today announced the financial results for the third quarter ended September 30, 2021.*Third Quarter 2021 Financial Highlights Compared to Third Quarter 2020*
· Consolidated net sales of $18.0 million, compared to $7.8 million
· Gross profit of $7.1 million, compared to $0.6 million
· Selling General & Administrative (“SG&A”) of $3.3 million, compared to $1.5 million
· Net income of $3.7 million, or $0.21 basic earnings per share (EPS), compared to a net loss of ($0.4) million, or ($0.10) EPS
*Nine Months 2021 Financial Highlights Compared to Nine Months 2020*
· Consolidated net sales of $46.0 million, compared to $26.1 million
· Gross profit of $11.1 million, compared to $1.6 million
· SG&A of $7.6 million, compared to $3.8 million
· Net income of $3.2 million, or $0.17 basic EPS, compared to a net loss of ($1.8) million, or ($0.43) EPS
*Full Year 2021 and 2022 Estimates *
· 2021 revenue expected to be in the range of $70 to $80 million
· 2022 revenue expectations remain at approximately $160 million
Harbor President and CEO, Sterling Griffin stated, “I am very proud of our dedicated employees and Board of Directors that have combined to drive Harbor to profitability in our first year as a public company. Our third quarter results demonstrate our commitment to increasing shareholder value through sustainable growth and increased earnings.”
*Results for the Third Quarter 2021*
Net sales for the third quarter of 2021 increased by 130.7% to $18.0 million, compared to net sales of $7.8 million for the third quarter of 2020. This increase was largely due to the sale of entitled land of $10.4 million to Lennar and fee build revenue of $2.8 million, which was partially offset by a decrease in home sales of ($3.9) million.
Gross profit for the third quarter of 2021 increased to $7.1 million, compared to $0.6 million for the third quarter of 2020. Gross margin for the third quarter of 2021 was 39.7%, compared to 8.0% for the third quarter of 2020. The increase in gross margin was primarily due to the sale of land at a 57.0% gross margin and lot sales of 35.7% gross margin.
SG&A expenses for the third quarter of 2021 were $3.3 million, or 18.4% of net sales, compared to $1.5 million, or 18.7% of net sales, for the third quarter of 2020. This increase in SG&A is primarily attributable to the continued investment in public company infrastructure and personnel to support our future growth plans, an increase in depreciation expense, and an increase in stock compensation expense.
For the third quarter of 2021, net income was $3.7 million, or $0.21 basic EPS, compared to net loss of ($0.4) million, or ($0.10) basic EPS, for the third quarter of 2020.
*Results for the Nine Months Ended September 30, 2021*
Net sales for the first nine months of 2021 increased by 76.5% to $46.0 million, compared to net sales of $26.1 million for the first nine months of 2020. This increase was largely due to sale of entitled land to Lennar of $19 million.
Gross profit for the first nine months of 2021 increased to $11.1 million, compared to $1.6 million for the first nine months of 2020. Gross margin for the first nine months of 2021 was 24.1%, compared to 6.2% for the first nine months of 2020. The increase in gross margin was primarily due to sale of entitled land to Lennar with a gross margin of 42%.
SG&A expenses for the first nine months of 2021 were $7.6 million, or 16.6 % of net sales, compared to $3.8 million, or 14.5% of net sales, for the first nine months of 2020. This increase is primarily attributable to the continued investment in public company infrastructure and personnel to support our future growth plans, an increase in D&O insurance, an increase in depreciation expense, and an increase in stock compensation expense.
For the first nine months of 2021, net income was $3.3 million, or $0.17 EPS, compared to net loss of ($1.8) million, or ($0.43) EPS, for the first nine months of 2020.
*Full Year 2021 and 2022 Estimates*
We expect full year 2021 revenues to be in the range of $70 to $80 million. We anticipate our fourth quarter 2021 revenues and net income to exceed our third quarter 2021 results. We continue to reiterate our previously announced 2022 revenue guidance of approximately $160 million.
*Financial Results Conference Call Details*
Harbor will host a conference call on Monday, November 15, 2021, at 9 a.m. PT (12 p.m. ET) to elaborate on the third quarter results and the Company’s outlook. The public may access the conference call through a live audio webcast available at https://investors.harborcustomhomes.com/events. Those who would like to submit written questions in advance, please email: IR@harborcustomdev.com. The conference call will be available by telephone at 1-877-407-0789 (for international callers, dial 1-201-689-8562), and refer to “Harbor” or conference ID: 13723841. A replay of the conference call will be available for two weeks at 1-844-512-2921 (for international callers, dial 1-412-317-6671) using the replay PIN: 13723841.
*About Harbor Custom Development, Inc.*
Harbor Custom Development, Inc. is a real estate development company involved in all aspects of the land development cycle including land acquisition, entitlements, construction of project infrastructure, home building, marketing, sales, and management of various residential projects in Western Washington's Puget Sound region; Sacramento, California; and Austin, Texas. Harbor has active or recently sold-out residential communities in Gig Harbor, Bremerton, Silverdale, Bainbridge Island, Belfair, Allyn, Port Orchard, Lacey, Burien, Yelm and Blaine in the state of Washington. In addition, Harbor has acquired land and will begin constructing homes in three new markets. In the Sacramento metro market, Harbor will be constructing homes in completed subdivisions in both Rocklin and Auburn, California. In the Austin metro market, Harbor has acquired developed lot inventory in Dripping Springs, Driftwood, and Horseshoe Bay, Texas. The Company recently acquired property in Punta Gorda, Florida, and plans to begin construction of oceanfront condominiums there in 2022. Harbor’s business strategy is to acquire and develop land strategically, based on an understanding of population growth patterns, entitlement restrictions, infrastructure development, and geo-economic forces. Harbor focuses on real estate within target markets with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and increasing populations. For more information on the Company, please visit www.harborcustomdev.com.
*Forward-Looking Statements*
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to, but are not limited to, expectations of future operating results and financial performance, including GAAP and non-GAAP guidance for quarterly and annual periods during the years ending December 31, 2021 and 2022, the calculation of certain of our key financial and operating metrics and expectations regarding sales of inventory, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “expect,” “plan,” anticipate,” “believe,” “estimate, “predict,” “target,” “project,” “intend,” “potential,” “would,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology that concerns our expectations, strategy, priorities, plans, or intentions. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all. These forward-looking statements are subject to various risks and uncertainties, including without limitation complications due to COVID-19 which could cause delays in dates of completion or closings, and those risks and uncertainties set forth in the Company’s filings with the Securities and Exchange Commission. Thus, actual results could be materially different. This document includes statements of summarized financial projections. There will be differences between the projected and actual results because events and circumstances frequently do not occur as expected and those differences may be material. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law.
*Investor Relations*
Hanover International
IR@harborcustomdev.com
866-744-0974
*HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES*
*D/B/A HARBOR CUSTOM HOMES*
*CONDENSED CONSOLIDATED BALANCE SHEETS* *September 30,
2021* *December 31,
2020* (unaudited)
ASSETS
Real Estate $ 105,463,700 $ 20,370,300 Property, Plant and Equipment, net 9,132,900 8,176,000 Right of Use Assets 788,400 873,800 Cash 4,787,700 2,396,500 Restricted Cash 597,600 - Prepaid Expense 2,248,100 1,658,000 Accounts Receivable, net 104,800 78,200 Contract Assets, net 4,762,400 - Deferred Offering Costs 133,400 65,100
TOTAL ASSETS $ 128,019,000 $ 33,617,900
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Construction Loans , net of Debt Discount of $878,600 and $502,400 respectively $ 38,682,100 $ 9,590,100 Construction Loans - Related Parties, net of Debt Discount of $1,416,300 and $670,200 respectively 11,376,000 5,819,700 Equipment Loans 5,731,800 5,595,500 Accounts Payable and Accrued Expenses 5,875,800 2,700,000 Operating Lease Liabilities 766,900 841,700 Finance Leases 611,300 999,400 Deferred Revenue 21,700 896,300 Note Payable PPP - 19,300 Dividends Payable 210,600 - Contract Liability 390,900 Note Payable D&O Insurance 1,284,000 741,200
TOTAL LIABILITIES 64,951,100 27,203,200
STOCKHOLDERS' EQUITY Preferred Stock, No Par 10,000,000 shares authorized and 1,260,555 issued and outstanding at September 30, 2021 and 0 outstanding and issued at December 31, 2020 $ 28,661,000 $ - Common Stock, No Par 50,000,000 shares authorized and 14,898,594 outstanding at September 30, 2021 and 5,636,548 issued and outstanding at December 31, 2020 37,057,900 11,956,900 Additional Paid In Capital 668,900 234,800 Accumulated Deficit (2,028,300 ) (4,487,100 ) Total Stockholders' Equity - Harbor Custom Development, Inc. 64,359,500 7,704,600 Non-Controlling Interest (1,291,600 ) (1,289,900 )
TOTAL STOCKHOLDERS' EQUITY 63,067,900 6,414,700
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 128,019,000 $ 33,617,900
(Amounts rounded to the nearest $100) *HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES* *D/B/A HARBOR CUSTOM HOMES* *CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS* *(Unaudited)* For the Three Months Ended
September 30, For the Nine Months Ended
September 30, *2021* *2020* *2021* *2020* Sales $ 18,010,600 $ 7,806,500 $ 46,017,200 $ 26,077,300 Cost of Sales 10,866,200 7,183,900 34,938,300 24,448,100 Gross Profit 7,144,400 622,600 11,078,900 1,629,200 Operating Expenses 3,322,100 1,458,200 7,639,700 3,769,900 Operating Income (Loss) 3,822,300 (835,600 ) 3,439,200 (2,140,700 ) Other Income (Expense) Loss on Sale of Equipment - (12,400 ) (35,900 ) (27,900 ) Forgiveness of Debt - - 10,000 - Other Income 1,200 - 113,800 13,000 Interest Expense (115,100 ) (163,900 ) (298,500 ) (254,200 ) Total Other Income (Expense) (113,900 ) (176,300 ) (210,600 ) (269,100 ) Income (Loss) Before Income Tax 3,708,400 (1,011,900 ) 3,228,600 (2,409,800 ) Income Tax Benefit - 571,600 - 561,500 Net Income (Loss) Attributable to Stockholders $ 3,708,400 $ (440,300 ) $ 3,228,600 $ (1,848,300 ) Net (Loss) Income Attributable to Non-controlling interests - (3,200 ) 1,700 (228,100 ) Preferred Dividends (631,400 ) - (771,500 ) - Net Income (Loss) Attributable to Common Stockholders $ 3,077,000 $ (437,100 ) $ 2,458,800 $ (1,620,200 ) Net Income (Loss) Per Share - Basic $ 0.21 $ (0.10 ) $ 0.17 $ (0.43 ) Net Income (Loss) Per Share - Diluted $ 0.20 $ (0.10 ) $ 0.17 $ (0.43 ) Weighted Average Common Shares Outstanding - Basic 14,898,594 4,180,054 14,350,143 3,737,318 Weighted Average Common Shares Outstanding - Diluted 15,058,918 4,180,054 14,515,710 3,737,318 (Amounts rounded to the nearest $100) *HARBOR CUSTOM DEVELOPMENT, INC. AND SUBSIDIARIES*
*D/B/A HARBOR CUSTOM HOMES*
*CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS*
*Nine Months Ended September, 2021 and 2020 (Unaudited)* *September 30, 2021**
* *September 30, 2020*
CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss) $ 3,228,600 $ (1,848,300 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation 783,500 419,200 Amortization of right of use assets 252,200 194,700 Forgiveness on PPP loan (10,000 ) - Loss on sale of equipment 35,900 27,900 Stock compensation 416,100 11,000 Net change in assets and liabilities: Accounts receivable (26,600 ) (42,500 ) Contract assets (4,762,400 ) - Prepaid expenses 820,300 (255,900 ) Real estate (82,755,400 ) (8,286,200 ) Deferred revenue (874,600 ) 1,297,400 Deferred income tax - (561,500 ) Payments on right of use liability (241,600 ) (209,000 ) Contract Liability 390,900 - Accounts payable and accrued expenses 3,175,800 (605,500 )
NET CASH (USED IN) OPERATING ACTIVITIES (79,567,300 ) (9,858,700 )
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (378,100 ) (401,100 ) Proceeds on the sale of equipment 69,500 330,400
NET CASH (USED IN) INVESTING ACTIVITIES (308,600 ) (70,700 )
CASH FLOWS FROM FINANCING ACTIVITIES Construction loans, net 29,468,300 8,829,900 Financing fees construction loans (1,476,900 ) (573,100 ) Construction loans related parties, net 6,302,800 (6,515,700 ) Financing fees related party construction loans (1,983,900 ) (396,900 ) Payments on financing leases (289,000 ) (380,000 ) Proceeds from PPP loan - 582,800 Payments on PPP loan (9,300 ) - Due to related party - (8,100 ) Repayments on note payable D&O insurance (867,600 ) - Net proceeds from issuance of common stock 25,101,000 10,789,100 Net proceeds from issuance of preferred stock 28,661,000 - Repayment on equipment loans (1,430,500 ) (476,700 ) Proceeds from exercise of stock options 18,000 - Dividends (560,900 ) - Deferred offering cost (68,300 ) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 82,864,700 11,851,300
NET INCREASE IN CASH AND RESTRICTED CASH 2,988,800 1,921,900
CASH AND RESTRICTED CASH AT BEGINNING OF YEAR 2,396,500 430,000
CASH AND RESTRICTED CASH AT END OF PERIOD $ 5,385,300 $ 2,351,900
(Amounts rounded to the nearest $100)