• Landsea Homes Reports Fourth Quarter and Full Year 2022 Results

    Source: Nasdaq GlobeNewswire / 07 Mar 2023 06:00:19   America/New_York

    Fourth Quarter 2022 Highlights

    • Home sales revenue increased 25% year-over-year to $417.5 million
    • Total homes delivered increased 32% to 703 homes
    • Net income of $25.6 million, or $0.62 per diluted share

    Full Year 2022 Highlights

    • Home sales revenue increased 49% to $1.4 billion
    • Total homes delivered increased 45% to 2,370 homes
    • Net income of $73.6 million, or $1.70 per diluted share
    • Year-end book value per share of $16.04

    NEWPORT BEACH, Calif., March 07, 2023 (GLOBE NEWSWIRE) -- Landsea Homes Corporation (Nasdaq: LSEA) (“Landsea Homes” or the “Company”), a publicly traded homebuilder, reported financial results for the fourth quarter ended December 31, 2022. For the quarter, the Company reported pretax income of $34.4 million, and net income of $25.6 million, or $0.62 per diluted share. Prior year reported pretax income was $49.2 million with net income of $38.4 million, or $0.83 per diluted share. Adjusted net income (a non-GAAP measure) for the quarter was $32.5 million or $0.81 per diluted share. For the corresponding prior year period, adjusted net income was $36.0 million, or $0.79 per diluted share.

    Management Commentary

    “2022 was a banner year for Landsea Homes as we generated total revenue of over $1.4 billion and earnings of $1.70 per diluted share, both records for our company.” said John Ho, Chief Executive Officer of Landsea Homes. “We successfully grew our presence in key markets while expanding our home sales gross margin and maintaining a strong balance sheet. We also returned capital to shareholders through our share repurchase program and increased our book value per share by 20% to $16.04.”

    Mr. Ho continued, “While we produced record top and bottom-line results in 2022, our new order activity stalled in the second half of the year, due to the combination of rising mortgage rates and declining homebuyer confidence. These two factors led to a drop in new home sales and a spike in cancellations, which negatively impacted our net order results in the third and fourth quarters. However, we began to see sequential improvement in both new order activity and cancellations beginning in December, and this improvement continued into January and February, giving us renewed optimism as we head into the Spring selling season.”

    Fourth Quarter Operating Results

    Total revenue increased 6.9% to $426.0 million compared to $398.5 million in the fourth quarter of 2021, primarily driven by the performance of our Florida division and the delivery of units from our New York operations.

    Total homes delivered increased 32% to 703 homes at an average sales price of $594,000 compared to 534 homes delivered at an average sales price of $624,000 in the fourth quarter of 2021. The increase in deliveries was attributable to the larger contribution of our Florida operations, coupled with deliveries from New York.

    Net new home orders were 88 homes with a dollar value of $57.5 million, an average sales price of $653,000 and a monthly absorption rate of 0.5 sales per active community. This compares to 440 homes with a dollar value of $313.1 million, an average sales price of $712,000 and a monthly absorption rate of 4.2 sales per active community in the prior year period. The decrease in new home orders was due to slowing demand related to the significant increase in interest rates which has created uncertainty with homebuyers and impacted affordability.

    Home sales gross margin decreased to 19.0% from 21.5% in the prior year period. Adjusted home sales gross margin (a non-GAAP measure) decreased to 23.4% compared to 25.0% in the prior year period. The decrease was primarily due to additional sales incentives used to close homes during the quarter, most notably in Arizona and California, partially offset by increased gross margins in Florida during the current quarter.

    Net income attributable to Landsea Homes was $25.6 million compared to $38.4 million in the prior year period. Adjusted net income attributable to Landsea Homes (a non-GAAP measure) was $33.3 million compared to $36.8 million in the prior year period. Net income per share on a fully diluted basis was $0.62 compared to $0.83 in the fourth quarter of 2021. Adjusted net income per share (a non-GAAP measure) on a fully diluted basis increased to $0.81 compared to $0.79 in the fourth quarter of 2021.

    Adjusted EBITDA (a non-GAAP measure) was $53.9 million compared to $57.9 million in the prior year period.

    Full Year 2022 Operating Results

    Total revenue increased 41.4% to $1.4 billion compared to $1.0 billion for the full year 2021, primarily driven by the performance of our Florida division and the delivery of units from our New York operations.

    Total homes delivered increased 45% to 2,370 homes at an average sales price of $588,000 compared to 1,640 homes delivered at an average sales price of $571,000 for the full year 2021. The increase in deliveries was attributable to the larger contribution of our Florida operations, coupled with deliveries from New York.

    Net new home orders were 1,520 homes with a dollar value of $959.6 million, an average sales price of $631,000 and a monthly absorption rate of 2.4 sales per active community. This compares to 1,471 homes with a dollar value of $963.4 million, an average sales price of $655,000 and a monthly absorption rate of 3.8 sales per active community in the prior year. The increase in new home orders was due to growth in our Florida division while the decrease in ASP was due to a shift in the mix of homes from California to Florida.

    Total homes in backlog decreased 33% to 670 homes with a dollar value of $380.9 million and an average sales price of $569,000 at December 31, 2022. This compares to 998 homes with a dollar value of $586.2 million and an average sales price of $587,000 at December 31, 2021.

    Total lots owned or controlled at December 31, 2022, increased 33% to 11,593 compared to 8,740 at December 31, 2021, primarily due to the acquisition of Hanover Family Builders and additional lots under control in Texas. Additionally, we accelerated our asset-light strategy, controlling 54% of our lots at the end of 2022.

    Home sales gross margin increased to 20.4% from 17.5% in the prior year. Adjusted home sales gross margin (a non-GAAP measure) increased to 26.9% compared to 22.6% in the prior year. The increase was due to improved gross margins across the Company, particularly in our California and Florida segments, which were tempered in the fourth quarter.

    Net income attributable to Landsea Homes increased to $73.6 million compared to $52.8 million in the prior year period. Adjusted net income attributable to Landsea Homes (a non-GAAP measure) increased to $123.3 million compared to $66.8 million in the prior year. Net income per share on a fully diluted basis increased to $1.70 compared to $1.14 in the prior year. Adjusted net income per share (a non-GAAP measure) on a fully diluted basis increased to $2.85 compared to $1.44 in the prior year.

    Adjusted EBITDA (a non-GAAP measure) increased to $208.0 million compared to $117.9 million in the prior year.

    Balance Sheet

    As of December 31, 2022, the Company had total liquidity of $301.4 million consisting of cash and cash equivalents and cash held in escrow of $140.7 million as well as $160.7 million in availability under the Company’s $675.0 million unsecured revolving credit facility. Total debt, net of issuance costs, was $505.4 million at December 31, 2022 compared to $461.1 million at December 31, 2021.

    Landsea Homes’ ratio of debt to capital was 41.6% at December 31, 2022 and the Company’s net debt to total capitalization (a non-GAAP measure) was 30.0% at December 31, 2022.

    Mr. Ho concluded, “From a macro perspective, we continue to see positive leading indicators for our industry. Unemployment rates remain at historically low levels, and the supply of existing homes for sale is constrained. There is a need for new homes in this country and particularly in the markets in which Landsea has a presence. As a result, we believe our company is well positioned to capitalize on the long-term trends in homebuilding industry thanks to our geographic footprint, our affordable product focus and the appeal of our High Performance Homes.”

    2023 Outlook

    First quarter 2023

    • New home deliveries anticipated to be in a range of 400 to 445
    • Delivery ASPs expected to be in a range of $520,000 to $525,000
    • Home sales gross margins between 17% and 18% on a GAAP basis and between 21% and 22% on an adjusted basis.

    Conference Call

    The Company will hold a conference call today at 7:00 a.m. Pacific Time (10:00 a.m. Eastern time) to discuss its fourth quarter 2022 results.

    • Toll-free dial-in number: 1-888-999-3182
    • International dial-in number: 1-848-280-6330

    The conference call will be broadcast live and available for replay here and via the Investors section of the Landsea Homes website at https://ir.landseahomes.com/.

    A replay of the conference call will be available after 1:00 p.m. Eastern time on the same day through the same time on March 21, 2023.

    Replay Details:

    • Toll-free replay number: 1-844-512-2921
    • International replay number: 1-412-317-6671
    • Replay ID: 11152571

    About Landsea Homes

    Landsea Homes Corporation (Nasdaq: LSEA) is a publicly traded residential homebuilder based in Newport Beach, CA that designs and builds best-in-class homes and sustainable master-planned communities in some of the nation's most desirable markets. The Company has developed homes and communities in New York, Boston, New Jersey, Arizona, Florida, Texas and throughout California in Silicon Valley, Los Angeles and Orange County. Landsea Homes was named the 2022 winner of the prestigious Builder of the Year award, presented by BUILDER magazine, in recognition of a historical year of transformation.

    An award-winning homebuilder that builds suburban, single-family detached and attached homes, mid-and high-rise properties, and master-planned communities, Landsea Homes is known for creating inspired places that reflect modern living and provides homebuyers the opportunity to "Live in Your Element." Our homes allow people to live where they want to live, how they want to live – in a home created especially for them.

    Driven by a pioneering commitment to sustainability, Landsea Homes' High Performance Homes are responsibly designed to take advantage of the latest innovations with home automation technology supported by Apple®. Homes include features that make life easier and provide energy savings that allow for more comfortable living at a lower cost through sustainability features that contribute to healthier living for both homeowners and the planet.

    Led by a veteran team of industry professionals who boast years of worldwide experience and deep local expertise, Landsea Homes is committed to positively enhancing the lives of our homebuyers, employees and stakeholders by creating an unparalleled lifestyle experience that is unmatched.

    For more information on Landsea Homes, visit: www.landseahomes.com.

    Forward-Looking Statements

    Certain statements in this press release may constitute “forward-looking statements” within the meaning of the federal securities laws, including, but not limited to, our expectations for future financial performance, business strategies or expectations for our business, including as they relate to anticipated effects of the business combination with LF Capital Acquisition Corporation on January 7, 2021 (the “Business Combination”). These statements constitute projections, forecasts, and forward-looking statements, and are not guarantees of performance. Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Words such as “may,” “can,” “should,” “will,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” “look” or similar expressions may identify forward-looking statements. Specifically, forward-looking statements may include statements relating to:

    • the benefits of the Business Combination and the acquisitions of Vintage Estate and Hanover (the “Acquisitions”);
    • the future financial performance of the Company;
    • changes in the market for Landsea Homes’ products and services; and
    • other expansion plans and opportunities.

    These forward-looking statements are based on information available as of the date of this press release and our management’s current expectations, forecasts, and assumptions, and involve a number of judgments, risks and uncertainties that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

    These risks and uncertainties include, but not are limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission (“SEC”). These risk factors and those identified elsewhere in this press release, among others, could cause actual results to differ materially from historical performance and include, but are not limited to:

    • the ability to recognize the anticipated benefits of the Acquisitions, which may be affected by, among other things, competition, the ability to integrate the combined businesses and the acquired business, and the ability of the combined business and the acquired business to grow and manage growth profitably;
    • costs related to continuing as a public company;
    • the ability to maintain the listing of Landsea Homes’ securities on Nasdaq;
    • the outcome of any legal proceedings that may be instituted against the Company;
    • changes in applicable laws or regulations;
    • the inability to launch new Landsea Homes products or services or to profitably expand into new markets;
    • the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors;
    • risks and uncertainties relating to the material weaknesses in our internal controls over financial reporting;
    • the possibility that additional information may arise that would require us to make further adjustments or revisions to our historical financial statements, report additional material weaknesses or delay the filing of our current financial statements; and
    • other risks and uncertainties indicated in Landsea Homes’ SEC reports or documents filed or to be filed with the SEC by Landsea Homes.

    Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

    Investor Relations Contact:
    Drew Mackintosh
    Mackintosh Investor Relations, LLC
    drew@mackintoshir.com
    (310) 924-9036

    Media Contact:
    Annie Noebel
    Cornerstone Communications
    anoebel@cornerstonecomms.com
    (949) 449-2527



    Landsea Homes Corporation
    Consolidated Balance Sheets
    (in thousands, except share and per share amounts)

      December 31,
       2022   2021 
    Assets    
    Cash and cash equivalents $123,634  $342,810 
    Cash held in escrow  17,101   4,079 
    Restricted cash  —   443 
    Real estate inventories  1,093,369   844,792 
    Due from affiliates  3,744   4,465 
    Investment in and advances to unconsolidated joint ventures  41   470 
    Goodwill  68,639   24,457 
    Other assets  133,968   43,998 
    Total assets $1,440,496  $1,265,514 
         
    Liabilities    
    Accounts payable $74,445  $73,734 
    Accrued expenses and other liabilities  149,426   97,724 
    Due to affiliates  884   2,357 
    Warrant liability  —   9,185 
    Notes and other debts payable, net  505,422   461,117 
    Total liabilities  730,177   644,117 
         
    Commitments and contingencies    
         
    Equity    
    Stockholders’ equity:    
    Preferred stock, $0.0001 par value, 50,000,000 shares authorized, none issued and outstanding as of December 31, 2022 and December 31, 2021, respectively  —   — 
    Common stock, $0.0001 par value, 500,000,000 shares authorized, 42,110,794 issued and 40,884,268 outstanding as of December 31, 2022, 46,281,091 issued and outstanding as of December 31, 2021  4   5 
    Additional paid-in capital  497,598   535,345 
    Retained earnings  158,348   84,797 
    Total stockholders’ equity  655,950   620,147 
    Noncontrolling interests  54,369   1,250 
    Total equity  710,319   621,397 
    Total liabilities and equity $1,440,496  $1,265,514 


    Landsea Homes Corporation
    Consolidated Statements of Operations
    (in thousands, except share and per share amounts)

      Three Months Ended
    December 31,    		Year Ended
    December 31,
       2022   2021   2022   2021 
    Revenue        
    Home sales $417,481  $333,119  $1,392,750  $936,400 
    Lot sales and other  8,477   65,363   53,699   86,904 
    Total revenue  425,958   398,482   1,446,449   1,023,304 
             
    Cost of sales        
    Home sales  337,984   261,398   1,108,204   772,575 
    Lot sales and other  10,775   51,202   51,321   68,131 
    Total cost of sales  348,759   312,600   1,159,525   840,706 
             
    Gross margin        
    Home sales  79,497   71,721   284,546   163,825 
    Lot sales and other  (2,298)  14,161   2,378   18,773 
    Total gross margin  77,199   85,882   286,924   182,598 
             
    Sales and marketing expenses  24,939   17,960   89,305   52,840 
    General and administrative expenses  18,591   24,440   89,325   70,266 
    Total operating expenses  43,530   42,400   178,630   123,106 
             
    Income from operations  33,669   43,482   108,294   59,492 
             
    Other income (expense), net  730   (41)  (63)  3,886 
    Equity in net income (loss) of unconsolidated joint ventures  10   448   149   1,262 
    Gain (loss) on remeasurement of warrant liability  —   5,335   (7,315)  2,090 
    Pretax income  34,409   49,224   101,065   66,730 
             
    Provision for income taxes  7,940   10,835   25,400   13,995 
             
    Net income  26,469   38,389   75,665   52,735 
    Net income (loss) attributable to noncontrolling interests  888   (10)  2,114   (51)
    Net income attributable to Landsea Homes Corporation $25,581  $38,399  $73,551  $52,786 
             
    Earnings per share:        
    Basic $0.63  $0.83  $1.71  $1.14 
    Diluted $0.62  $0.83  $1.70  $1.14 
             
    Weighted average shares outstanding:        
    Basic  39,929,310   45,281,091   42,052,696   45,198,722 
    Diluted  40,065,480   45,380,155   42,199,462   45,250,718 


    Home Deliveries and Home Sales Revenue

     Three Months Ended December 31, 2022
     2022 2021 % Change
     Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP
     (dollars in thousands)
    Arizona162 $73,631 $455 211 $83,366 $395 (23)% (12)% 15%
    California183  160,366  876 233  207,277  890 (21)% (23)% (2)%
    Florida340  154,348  454 80  32,585  407 325% 374% 12%
    Metro New York4  15,666  3,917 —  —  N/A N/A  N/A  N/A 
    Texas14  13,470  962 10  9,891  989 40% 36% (3)%
    Total703 $417,481 $594 534 $333,119 $624 32% 25% (5)%


     Year Ended December 31,
     2022 2021 % Change
     Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP
     (dollars in thousands)
    Arizona613 $274,512 $448 771 $276,174 $358 (20)% (1)% 25%
    California572  502,583  879 617  553,957  898 (7)% (9)% (2)%
    Florida1,106  473,059  428 232  87,991  379 377% 438% 13%
    Metro New York47  111,424  2,371 —  — N/A N/A  N/A  N/A 
    Texas32  31,172  974 20  18,278  914 60% 71% 7%
    Total2,370 $1,392,750 $588 1,640 $936,400 $571 45% 49% 3%


    Net New Home Orders, Dollar Value of Orders, and Monthly Absorption Rates

     Three Months Ended December 31,
     2022
    		 2021 % Change
     HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate    		 HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate    		 HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate
     (dollars in thousands)
    Arizona(14)$(11,049)$789(0.3) 154 $70,567 $4585.0  (109)%(116)%72%(106)%
    California38  23,951  6301.2  209  183,943  8805.7  (82)%(87)%(28%)(79)%
    Florida58  30,367  5240.6  62  29,490  4762.6  (6)%3%10%(77)%
    Metro New York3  11,671  3,8903.3  12  24,169  2,0144.0  (75)%(52)%93%(18)%
    Texas(1)3  2,556  8521.0  3  4,892 N/AN/A  N/A N/A N/A N/A 
    Total88 $57,496 $6530.5  440 $313,061 $7124.2  (80)%(82)%(8)%(88)%

    (1) The ASP calculation for our Texas segment for the three months ended December 31, 2021, as well as the percent changes from that period, are not meaningful due to cancellations exceeding sales as contracts were renegotiated. Our four new sales contracts during the three months ended December 31, 2021 had an ASP of $1,147 thousand.

     Year Ended December 31,
     2022 2021
    		 % Change
     HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate    		 HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate    		 HomesDollar
    Value    		ASPMonthly
    Absorption
    Rate
     (dollars in thousands)
    Arizona296 $143,371 $4841.9  685 $284,474 $4154.5  (57)%(50)%17%(58)%
    California395  354,656  8983.2  631  563,922  8944.6  (37)%(37)%—%(30)%
    Florida(1)786  380,396  4842.5  138  65,046  4711.9  470%485%3%32%
    Metro New York23  62,333  2,7102.4  25  50,687  2,0273.0  (8)%23%34%(20)%
    Texas(1)(2)20  18,824  9410.8  (8) (692)N/A(0.5) N/A N/A N/A (260)%
    Total1,520 $959,580 $6312.4  1,471 $963,437 $6553.8  3%—%(4)%(37)%

    (1) Monthly absorption rates for Florida and Texas in 2021 are based on eight months, for the time subsequent to the acquisition of Vintage in May 2021.
    (2) The ASP calculation for our Texas segment in 2021, as well as the percent changes from that period, are not meaningful due to cancellations exceeding sales as contracts were renegotiated. Our seven new sales contracts during the period from acquisition to December 31, 2021 had an ASP of $1,121 thousand.


    Average Selling Communities

      Three Months Ended December 31, Year Ended December 31,
      2022
    		 2021 % Change 2022
    		 2021 % Change
    Arizona 15.7  10.3  52% 12.7  12.6  1%
    California 10.7  12.3  (13)% 10.3  11.4  (10)%
    Florida(1) 30.3  8.0  279% 26.7  9.0  197%
    Metro New York(2) 0.3  1.0  (70)% 0.8  0.7  14%
    Texas(1) 1.0  3.0  (67)% 2.2  2.0  10%
    Total 58.0  34.6  68% 52.7  32.0  65%

    (1) Average selling communities calculations for Florida and Texas in 2021 are based on eight months, for the time subsequent to the acquisition of Vintage in May 2021.
    (2) Metro New York began selling at one community in May 2021 and is no longer considered actively selling beginning November 2022 as the project winds up.


    Backlog

     December 31, 2022 December 31, 2021 % Change
     Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP Homes Dollar
    Value    		 ASP
     (dollars in thousands)
    Arizona105 $49,986 $476 422 $181,232 $429 (75)% (72)% 11%
    California79  78,446  993 256  226,376  884 (69)% (65)% 12%
    Florida(1)485  250,897  517 283  115,538  408 71% 117% 27%
    Metro New York1  1,597  1,597 25  50,687  2,027 (96)% (97)% (21)%
    Texas—  —  N/A 12  12,348  1,029 N/A  N/A  N/A 
    Total670 $380,926 $569 998 $586,181 $587 (33)% (35)% (3)%

    (1) Backlog acquired in Florida at the date of the Hanover acquisition was 522 homes with a value of $228,097 thousand.

    Lots Owned or Controlled

     December 31, 2022 December 31, 2021  
     Lots OwnedLots
    Controlled    		Total Lots OwnedLots
    Controlled    		Total % Change
    Arizona2,1871,9924,179 3,2741,1244,398 (5)%
    California5591,7142,273 8131,0931,906 19%
    Florida2,5301,5214,051 9664571,423 185%
    Metro New York3—3 50—50 (94)%
    Texas41,0831,087 45918963 13%
    Total5,2836,31011,593 5,1483,5928,740 33%


    Home Sales Gross Margins

    Home sales gross margin measures the price achieved on delivered homes compared to the costs needed to build the home. In the following table, we calculate gross margins adjusting for interest in cost of sales, inventory impairments, and purchase price accounting for acquired work in process inventory. This non-GAAP financial measure should not be used as a substitute for the Company's operating results in accordance with GAAP. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. We believe the below information is meaningful as it isolates the impact that indebtedness, impairments, and acquisitions have on our gross margins and allows for comparability to previous periods and competitors.

      Three Months Ended December 31,
       2022  %  2021  %
      (dollars in thousands)
    Home sales revenue $417,481  100.0% $333,119  100.0%
    Cost of home sales  337,984  81.0%  261,398  78.5%
    Home sales gross margin  79,497  19.0%  71,721  21.5%
    Add: Interest in cost of home sales  8,968  2.1%  7,777  2.3%
    Add: Inventory impairments  —  —%  —  —%
    Adjusted home sales gross margin excluding interest and inventory impairments  88,465  21.2%  79,498  23.9%
    Add: Purchase price accounting for acquired inventory  9,250  2.2%  3,619  1.1%
    Adjusted home sales gross margin excluding interest, inventory impairments, and purchase price accounting for acquired inventory $97,715  23.4% $83,117  25.0%


      Year Ended December 31,
       2022  %  2021  %
      (dollars in thousands)
    Home sales revenue $1,392,750  100.0% $936,400  100.0%
    Cost of home sales  1,108,204  79.6%  772,575  82.5%
    Home sales gross margin  284,546  20.4%  163,825  17.5%
    Add: Interest in cost of home sales  40,192  2.9%  33,328  3.6%
    Add: Inventory impairments  —  —%  —  —%
    Adjusted home sales gross margin excluding interest and inventory impairments  324,738  23.3%  197,153  21.1%
    Add: Purchase price accounting for acquired inventory  50,412  3.6%  14,588  1.6%
    Adjusted home sales gross margin excluding interest, inventory impairments, and purchase price accounting for acquired inventory $375,150  26.9% $211,741  22.6%


    EBITDA and Adjusted EBITDA

    The following tables present EBITDA and Adjusted EBITDA for the three months and years ended December 31, 2022 and 2021. Adjusted EBITDA is a non-GAAP financial measure used by management in evaluating operating performance. We define Adjusted EBITDA as net income before (i) income tax expense (benefit), (ii) interest expenses, (iii) depreciation and amortization, (iv) inventory impairments, (v) purchase accounting adjustments for acquired work in process inventory related to business combinations, (vi) loss (gain) on debt extinguishment or forgiveness, (vii) transaction costs related to the Merger and business combinations, (viii) the impact of income or loss allocations from our unconsolidated joint ventures, and (ix) loss on remeasurement of warrant liability. We believe Adjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest, effective tax rates, levels of depreciation and amortization, and items considered to be non-recurring. The economic activity related to our unconsolidated joint ventures is not core to our operations and is the reason we have excluded those amounts. Accordingly, we believe this measure is useful for comparing our core operating performance from period to period. Our presentation of Adjusted EBITDA should not be considered as an indication that our future results will be unaffected by unusual or non-recurring items.

      Three Months Ended December 31,
       2022   2021 
      (dollars in thousands)
    Net income $26,469  $38,389 
    Provision for income taxes  7,940   10,835 
    Interest in cost of sales  9,152   7,861 
    Interest relieved to equity in net income of unconsolidated joint ventures  —   211 
    Depreciation and amortization expense  1,104   2,153 
    EBITDA  44,665   59,449 
    Purchase price accounting for acquired inventory  9,250   3,619 
    Transaction costs  —   821 
    Equity in net income of unconsolidated joint ventures, net of interest  (10)  (659)
    Gain on remeasurement of warrant liability  —   (5,335)
    Adjusted EBITDA $53,905  $57,895 


      Year Ended December 31,
       2022   2021 
      (dollars in thousands)
    Net income $75,665  $52,735 
    Provision for income taxes  25,400   13,995 
    Interest in cost of sales  40,428   33,509 
    Interest relieved to equity in net income of unconsolidated joint ventures  70   1,267 
    Interest expense  —   32 
    Depreciation and amortization expense  5,549   5,393 
    EBITDA  147,112   106,931 
    Purchase price accounting for acquired inventory  50,412   14,588 
    Transaction costs  883   5,313 
    Equity in net income of unconsolidated joint ventures, net of interest  (219)  (2,529)
    Loss (gain) on debt extinguishment or forgiveness  2,496   (4,266)
    Loss (gain) on remeasurement of warrant liability  7,315   (2,090)
    Adjusted EBITDA $207,999  $117,947 


    Adjusted Net Income

    Adjusted Net Income to Landsea Homes is a non-GAAP financial measure that we believe is useful to management, investors and other users of our financial information in evaluating and understanding our operating results without the effect of certain expenses that were historically pushed down by our parent company and other non-recurring items. We believe excluding these items provides a more comparable assessment of our financial results from period to period. Adjusted Net Income to Landsea Homes is calculated by excluding the effects of related party interest that was pushed down by our parent company, purchase accounting adjustments for acquired work in process inventory related to business combinations, the impact from our unconsolidated joint ventures, Merger related transaction costs, loss (gain) on debt extinguishment or forgiveness, and loss on remeasurement of warrant liability, and tax-effected using a blended statutory tax rate. The economic activity related to our unconsolidated joint ventures is not core to our operations and is the reason we have excluded those amounts. We also adjust for the expense of related party interest pushed down from our parent company as we have no obligation to repay the debt and related interest.

      Three Months Ended December 31,
       2022   2021 
      (dollars in thousands, except share and per share amounts)
    Net income attributable to Landsea Homes Corporation $25,581  $38,399 
         
    Previously capitalized related party interest included in cost of sales  1,299   1,857 
    Equity in net income of unconsolidated joint ventures  (10)  (448)
    Purchase price accounting for acquired inventory  9,250   3,619 
    Gain on remeasurement of warrant liability  —   (5,335)
    Total adjustments  10,539   (307)
    Tax-effected adjustments(1)  7,726   (1,633)
         
    Adjusted net income attributable to Landsea Homes Corporation $33,307  $36,766 
         
         
    Net income attributable to Landsea Homes Corporation $25,581  $38,399 
    Less: undistributed earnings allocated to participating shares  (624)  (849)
    Net income attributable to common stockholders $24,957  $37,550 
         
    Adjusted net income attributable to Landsea Homes Corporation $33,307  $36,766 
    Less: adjusted undistributed earnings allocated to participating shares  (813)  (813)
    Adjusted net income attributable to common stockholders $32,494  $35,953 
         
    Earnings per share    
    Basic $0.63  $0.83 
    Diluted $0.62  $0.83 
         
    Adjusted earnings per share    
    Basic $0.81  $0.79 
    Diluted $0.81  $0.79 
         
    Weighted shares outstanding    
    Weighted average common shares outstanding used in EPS - basic  39,929,310   45,281,091 
    Weighted average common shares outstanding used in EPS - diluted  40,065,480   45,380,155 

    (1) Our tax-effected adjustments are based on our federal rate and a blended state rate adjusted for certain discrete items.

      Year Ended December 31,
       2022   2021 
      (dollars in thousands, except share and per share amounts)
    Net income attributable to Landsea Homes Corporation $73,551  $52,786 
         
    Previously capitalized related party interest included in cost of sales  5,130   11,670 
    Equity in net income of unconsolidated joint ventures  (149)  (1,262)
    Purchase price accounting for acquired inventory  50,412   14,588 
    Merger related transaction costs  —   2,656 
    Loss (gain) on debt extinguishment or forgiveness  2,496   (4,266)
    Loss (gain) on remeasurement of warrant liability  7,315   (2,090)
    Total adjustments  65,204   21,296 
    Tax-effected adjustments(1)  49,755   14,004 
         
    Adjusted net income attributable to Landsea Homes Corporation $123,306  $66,790 
         
         
    Net income attributable to Landsea Homes Corporation $73,551  $52,786 
    Less: undistributed earnings allocated to participating shares  (1,706)  (1,161)
    Net income attributable to common stockholders $71,845  $51,625 
         
    Adjusted net income attributable to Landsea Homes Corporation $123,306  $66,790 
    Less: adjusted undistributed earnings allocated to participating shares  (2,861)  (1,469)
    Adjusted net income attributable to common stockholders $120,445  $65,321 
         
    Earnings per share    
    Basic $1.71  $1.14 
    Diluted $1.70  $1.14 
         
    Adjusted earnings per share    
    Basic $2.86  $1.45 
    Diluted $2.85  $1.44 
         
    Weighted shares outstanding    
    Weighted average common shares outstanding used in EPS - basic  42,052,696   45,198,722 
    Weighted average common shares outstanding used in EPS - diluted  42,199,462   45,250,718 

    (1) Our tax-effected adjustments are based on our federal rate and a blended state rate adjusted for certain discrete items.


    Net Debt to Total Capital

    The following table presents the ratio of debt to capital as well as the ratio of net debt to total capital which is a non-GAAP financial measure. The ratio of debt to capital is computed as the quotient obtained by dividing total debt, net of issuance costs, by total capital (sum of total debt, net of issuance costs, plus total equity).

    The non-GAAP ratio of net debt to total capital is computed as the quotient obtained by dividing net debt (which is total debt, net of issuance costs, less cash, cash equivalents, and restricted cash as well as cash held in escrow to the extent necessary to reduce the debt balance to zero) by total capital. Prior to the fourth quarter of 2022, we presented the non-GAAP ratio of net debt to net capital computed as the quotient obtained by dividing net debt by net capital (sum of net debt plus total equity). During the fourth quarter of 2022, we began presenting the non-GAAP ratio of net debt to total capital, which is consistent with the ratio presented by our peers. The most comparable GAAP financial measure is the ratio of debt to capital. We believe the ratio of net debt to total 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 debt, 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 capital does not take into account our liquidity and we believe that the ratio of net debt to total capital provides supplemental information by which our financial position may be considered.

    See table below reconciling this non-GAAP measure to the ratio of debt to capital.

      December 31,
       2022   2021 
      (dollars in thousands)
    Total notes and other debts payable, net $505,422  $461,117 
    Total equity  710,319   621,397 
    Total capital $1,215,741  $1,082,514 
    Ratio of debt to capital  41.6%  42.6%
         
    Total notes and other debts payable, net $505,422  $461,117 
    Less: cash, cash equivalents and restricted cash  123,634   343,253 
    Less: cash held in escrow  17,101   4,079 
    Net debt $364,687  $113,785 
         
    Total capital $1,215,741  $1,082,514 
    Ratio of net debt to total capital  30.0%  10.5%

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