United Homes Group Reports Decline in Earnings Amid Market Challenges
Shares of United Homes Group, Inc. (UHG) have fallen by 10.8% since the company released its earnings for the quarter ending March 31, 2025. In contrast, the S&P 500 Index has increased by 0.6% in the same timeframe. Over the past month, UHG stock has dropped significantly, down 17.2%, compared to the S&P 500’s 11.8% gain.
Revenue and Earnings Overview
In the first quarter of 2025, UHG generated revenues of $87 million, reflecting a 13.7% drop from $100.8 million in the same quarter last year. This revenue decline was largely due to an 18.9% year-over-year decrease in home closings, totaling 252 units compared to 311 a year earlier. Notably, the average sales price for production-built homes rose by 2.9% to approximately $345,000, up from $335,000 in first-quarter 2024.
Net income amounted to $18.2 million, or $0.31 per diluted share, down 27.1% from $24.9 million, or $0.44 per share, from the prior year’s quarter. This figure includes a $21.2 million non-cash gain from the fair value adjustment of derivative liabilities related to earnout considerations. Adjusted EBITDA was reported at $2.9 million, a 60.6% drop from $7.3 million in the prior year, indicating persistent margin pressure despite operational enhancements.
Other Key Business Metrics
Gross profit for the quarter decreased 12.2% year-over-year to $14.1 million, down from $16.1 million. The reported gross margin increased slightly to 16.2% from 16% in first-quarter 2024, attributed to lower interest expenses within the cost of sales. However, adjusted gross profit fell 20.4% to $16.4 million from $20.6 million for the same period last year, with the adjusted gross margin dropping to 18.8% from 20.4% due to higher incentives offered.
Net new orders also showed a significant decline, decreasing by 22.9% to 296 homes from 384. Nonetheless, United Homes observed improvements in sales and margins as the quarter progressed. Order momentum increased in the latter half of February and continued through March, with April orders rising 6% year-over-year. Regionally, Raleigh and Rosewood reported notable order growth, up 325% and 113%, respectively. The Midlands region had the highest closings at 124 homes, although this still marked a 17% decrease from last year. The Upstate market saw the most considerable drop in closings at 44%. UHG also managed to lower its average construction cycle time by 16 days compared to the previous year due to improvements in labor availability and internal efficiencies.
Selling, general, and administrative (SG&A) expenses reached $16.2 million, or 18.6% of revenue, down from $17.1 million. This included $2 million related to non-cash stock-based compensation. Adjusted SG&A, excluding this charge, represented 16.3% of revenues. Currently, United Homes’ liquidity stands at $86.9 million, comprising $25 million in cash and $61.9 million in unused committed credit facility capacity.
United Homes Group, Inc. Price, Consensus and EPS Surprise
United Homes Group, Inc. price-consensus-eps-surprise-chart
Management Commentary
Interim CEO Jamie Pirrello described the quarter as a “tale of two halves,” noting that January sales were sluggish due to seasonal factors and adverse weather conditions, leading to reduced closings in the latter part of the quarter. However, demand surged by late February, continuing into March and April.
President Jack Micenko emphasized a 400 basis-point sequential gross margin improvement, attributing it to the performance of 23 newly refreshed home designs, which achieved gross margins of near 24%. By April, an additional 27 of these homes had closed, with 91 homes in backlog as of April 30.
CFO Keith Feldman mentioned that UHG has already identified over $3.5 million in direct construction savings through cost-reduction strategies, with most benefits anticipated in the second half of the year. The company also achieved $1 million in first-quarter savings from lowered interest expenses resulting from a refinancing effort compared to the fourth quarter of 2024.
Factors Influencing Headline Numbers
The significant year-over-year declines in revenue, earnings, and gross profit can be attributed to fewer home closings stemming from a weak start to the quarter. Sales incentives and discounting of completed spec inventory further compressed margins. Nevertheless, UHG is shifting towards a higher mix of presold homes that typically command better margins through customization options and reduced pricing concessions.
Improvements in cycle times were realized due to enhanced material and labor availability, leading to a 16-day decrease in the average build cycle compared to last year. The move towards presales is expected to boost delivery predictability and minimize working capital tied up in unsold inventory.
Guidance and Outlook
While UHG did not provide formal guidance, management expressed optimism for the remainder of 2025. The company reported a 6% year-over-year increase in April orders and expects margin improvements to persist as refreshed home designs and cost savings develop. Additionally, UHG plans to unveil 10 new communities in the second quarter and 18 in the third quarter, many featuring the new home designs that have been well-received by buyers.
Other Developments
No acquisitions, divestitures, or major restructuring actions were reported during the quarter. However, UHG continues to uphold its asset-light, land-light strategy, maintaining control over approximately 7,500 lots through a combination of ownership, options, and land banking. The company is also assessing opportunities for geographic expansion based on advantageous demographic and economic trends.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
