Overview of Company’s Financial Performance

Revenue and Profit Trends

Revenues increased 6.3% from $94.8 million in Q1 2023 to $100.8 million in Q1 2024, primarily due to a 6.6% increase in the average sales price of homes. However, the number of home closings decreased 5.2% from 328 to 311, partially offsetting revenue growth.

Net income improved from a loss of $204.5 million in Q1 2023 to income of $24.9 million in Q1 2024. This was largely driven by a $233.4 million positive swing in the fair value of derivative liabilities.

Adjusted Gross Profit

Adjusted gross profit, which excludes interest and other non-recurring items, increased 7.6% from $19.2 million (20.2% of revenue) in Q1 2023 to $20.6 million (20.4% of revenue) in Q1 2024. This reflects slightly lower costs of sales from higher incentives offset by lower lumber expenses.

Expenses

SG&A expenses increased 2.4%, primarily due to higher public company costs to support growth and regulatory requirements.

Liquidity Position

Cash and available borrowing capacity decreased from $81.1 million at December 31, 2023 to $92.0 million at March 31, 2024, primarily due to the acquisition of Creekside Custom Homes for $12.7 million in January 2024.

Analysis of Strengths and Weaknesses

Strengths

• Successfully completed business combination in March 2023, providing improved access to growth capital
• Land-light operating model provides flexibility to navigate market volatility
  
• Mortgage joint venture improves customer conversion rates and backlog retention
• Build-to-rent platform expands product offerings and revenue sources

Weaknesses

• Rising interest rates and inflation reducing housing affordability
  
• Supply chain disruptions causing construction delays and cost increases
• Lower home closings and moderate decline in gross margins due to market softness

Outlook and Future Strategies

The company believes its land-light model positions it well to navigate softening demand. It plans to organically expand its community count and supplement growth with targeted acquisitions.

Key growth strategies include:

• Leveraging joint venture to improve sales conversion rates
• Expanding build-to-rent product to diversify revenue
• Entering new geographic markets through acquisitions
• Increasing total community count
  

The company has ample liquidity and access to capital to support operations and its growth strategy. While macroeconomic factors create uncertainty, the company is positioned to effectively adapt to market conditions.