United Homes Group, Inc · NASDAQ:UHG
United Homes — SPAC Merger (September 2022)
49 slides from United Homes's SPAC merger presentation, September 2022
Slide 1: United Homes Group Investor Presentation September 2022
United Homes Group (“UHG”) Investor Presentation September 2022
Slide 2: Table of Contents
Table of Contents I. Executive Summary II. Macro HousingOverview III. Operational Overview IV. UHG Growth Strategy V. Financial Summary
Slide 3: I. Executive Summary
I. Executive Summary
Slide 4: UHG + DiamondHead = Uniquely Positioned Partnership
4 UHG + DiamondHead = Uniquely Positioned Partnership Combination creates a publicly listed homebuilder capitalizing on key industry trends DiamondHead's Acquisition Criteria 1 2 3 4 5 6 Fundamental Value Attractive Long Competitive Attractive Growth Proven Operating Desired Product with Significant
Slide 5: Dynamic Partnership Between Seasoned Experts
5 Dynamic Partnership Between Seasoned Experts The business combination showcases both operational and capital markets expertise Michael Nieri David Hamamoto Chairman, President & CEO, Chairman & Co-CEO United Homes Group DiamondHead Partners Deep Homebuilding Expertise & Track Record Significant Re
Slide 6: Transaction Overview
6 Transaction Overview Sources ($ in millions) Pro-Forma Capitalization UHG Equity Rollover $407 Share Price $10.00 Pro-Forma Shares Outstanding 80(3) DHHC Cash in Trust(1) (2) 345 Pro-Forma Equity Value $799 UHG Rollover Net Debt 93 Pro Forma Cash (320) Total Sources $845 UHG Rollover Net Debt 93 U
Slide 7: UHG's Ongoing History of Excellence
7 UHG’s Ongoing History of Excellence Great Southern Homes is being rebranded under the parent company United Homes Group ~16% delivery CAGR from Active M&A discussions with 2019 to 2021 builders in-market Clemson ~669 bps of gross margin 91%+ of lots optioned Columbia Florence expansion fro
Slide 8: Significant Shareholder Value & Upside Opportunity
8 Significant Shareholder Value & Upside Opportunity UHG has multiple levers to drive strong growth rates throughout all points of the housing cycle Organic Growth (In-Market Growth) Accretive M&A Strong organic growth of ~16% delivery Based upon 2022 estimated housing starts CAGR from 2019 to 2021(
Slide 9: Land-Light Model Provides a Competitive Advantage
9 Land-Light Model Provides a Competitive Advantage UHG is strategically positioned to outperform the operating models of traditional homebuilders Traditional Model Land-Light Model Lower ROE Higher ROE Land ownership is capital intensive Optioned land provides a higher return and return dilutive th
Slide 10: Capital Efficient Land-Light Model
Capital Efficient Land-Light Model 10 Land-light builder’s higher ROE & stable margins across housing cycles drive premium valuations % of Lots Owned vs Optioned(1) Homebuilder Comps Net Income Margin(2)(3) Traditional Average = ~4% 91% 98% 87% 75% 62% 54% 53% 52% 47% 42% 33% 19% 25.0% Traditional H
Slide 11: Favorable Demographics in UHG's Core Markets
Favorable Demographics in UHG’s Core Markets 11 Rapid population & job growth in the southeast presents a dynamic opportunity for UHG Comparison of UHG Markets to National Averages UHG Current UHG Expansion U.S. (3) Markets(1) Markets(2) Richmond Population Greensboro Raleigh Growth 1.1% 0.7% 0.5% N
Slide 12: The United Homes Group Management Team
12 The United Homes Group Management Team Tenured management team with deep operational and public company experience Michael Nieri Shelton Twine Keith Feldman (1) Chairman, President & Chief Operating Officer Chief Financial Officer CEO, UHG at UHG at UHG Tom O’Grady Dan Goldstein Board Member & CA
Slide 13: 1H 2022 Performance Outpaced Historical Results
1H 2022 Performance Outpaced Historical Results 13 Despite the rise in interest rates, UHG continues to deliver strong operating & financial performance Total Unit Closings in 1st Half of the Year Despite the rise in interest rates in the first half of 2022 UHG continued to 873 796 outpace historica
Slide 14: II. Macro Housing Overview
II. Macro Housing Overview
Slide 15: Large Supply & Demand Gap in the U.S. Housing Market
15 Large Supply & Demand Gap in the U.S. Housing Market Subdued production since the housing crisis has created a multi-year supply deficit(1)(2)(3) Sustained underbuilding since 2007 (Units in 000s) Shortage of 5.5 to 6.8 million housing units as Cumulative Production Deficit of 5.5 to 1,600 6.
Slide 16: Historical U.S. Housing and Rental Data
16 Historical U.S. Housing and Rental Data U.S. housing supply remains at or near historic lows U.S. Housing Inventory(1) U.S Rental Vacancy Rate(2) U.S Median Days on Market(2) (Months Supply) 12.0 120 9% 9.6 10.0 100 8% 8.0 80 Average: 63 6.0 7% 60 4.0 40 1.7 6% 2.0 20 5.8% 0.0 5% 0 “The many fund
Slide 17: Strong Long-Term Fundamentals in the Southeast
17 Strong Long-Term Fundamentals in the Southeast Southeast housing market fundamentals continue to remain attractive UHG Market Affordability(1) UHG Market Employment Growth(1) 6.4x Average Home Price / Average Median Household Income UHG 6.0% UHG Trailing 5 Year Avg: 1.0% 5.9x Markets 5.6x 4.0% Na
Slide 18: Historical Relationship Between Mortgage Rates & Housing
Historical Relationship Between Mortgage Rates & Housing 18 New home sales activity has shown minimal correlation to interest rates since 2013 New Home Sales vs. 30 Year Mortgage Rate (Unemployment Rate) (Units in Thousands) (1) New Home Sales R2 New Home Sales to Unemployment Rate =.7809 (2) 30 Yea
Slide 19: Single-Family Rental (SFR) Market
19 Single-Family Rental (SFR) Market Construction of new SFR units supplies an unmet investor demand for units in the sunbelt markets Nationally SFR rents have been increasing over 10% annually in recent years driven by Single-Family Rentals Cumulative Investor the same dynamics as the for-sale mark
Slide 20: III. Operational Overview
III. Operational Overview
Slide 21: Affordable Entry-Level Focus
21 Affordable Entry-Level Focus UHG’s core product is focused on affordability & aligns with consumer demand UHG is one of the largest production homebuilders-and one of the 2021 Revenue By Buyer Segment lowest cost producers-in its markets BTR UHG produced attractive profit margins in 2021: 3rd
Slide 22: Land-Light Operating Model
22 Land-Light Operating Model UHG’s land-light model emulates a proven & successful homebuilder strategy Land & Lot Sourcing Relationships Traditional Third-Party Lot Developer Purchase Contracts: Highest ROEs in the Industry Through Housing Lots are controlled through purchased option contracts w
Slide 23: Consistent Financial Performance & Superior Returns
23 Consistent Financial Performance & Superior Returns Empirical evidence that land-light homebuilders generate consistent returns through housing cycles Less Capital Required Per Closing (1) % of Builders Generating Free Cash Flow Through Last Housing Cycle(2) Homebuilder Comps(3) vs. NVR (2006 - 2
Slide 24: Build-to-Rent Operating Segment
24 Build-to-Rent Operating Segment UHG is tactically positioned to capitalize on significant BTR opportunities Percentage of Single-Family-Homes Started For Rent(1) UHG’s low-cost production capabilities and highly attractive geographic footprint make it 6% an ideal build-to-rent supplier 5% 5% 5% 5
Slide 25: Case Study: Walnut Creek – Elgin, SC
25 Case Study: Walnut Creek – Elgin, SC The signature style & quality of UHG’s core product offering differentiates it from competition Project Overview Walnut Creek is a UHG community that began construction in July 2019 Subdivision community of 137 lots To date, 132 single family detached ho
Slide 26: Case Study: Harvest Glen – Piedmont, SC
26 Case Study: Harvest Glen – Piedmont, SC The signature style & quality of UHG’s core product offering differentiates it from competition Project Overview Harvest Glen is a UHG community that began construction in December 2020 Subdivision community of 160 lots To date, 89 single family detac
Slide 27: Seasoned Board Provides Deep Strategic Insight
27 Seasoned Board Provides Deep Strategic Insight UHG’s board members have seasoned experience across multiple industries Michael Tom O’ James Nikki Haley Nieri Grady Clements Board Member & Chairman, Board Member & Board Member & Former Governor President & CEO, Chief President of of South Carolina
Slide 28: IV. UHG Growth Strategy
IV. UHG Growth Strategy
Slide 29: UHG's Growth Strategy
UHG’s Growth Strategy 29 Building on the existing operational model to drive incremental growth and scale Expand community count in current operating divisions & continue to expand organically into high growth southeastern markets A strategic buyer of choice, targeting builders in high-value markets
Slide 30: UHG's Illustrative M&A Opportunities
UHG’s Illustrative M&A Opportunities 30 Executing on the M&A strategy has the potential to accelerate growth & shareholder value Hypothesis of M&A Strategy Key Target Acquisition Criteria Opportunity to be the “acquirer of choice” for smaller private 3x – 4x 250 – 1,000 builders across the Southeast
Slide 31: Expansive Array of Regional Acquisition Opportunities
Expansive Array of Regional Acquisition Opportunities 31 Uniquely positioned for regional acquisition strategy with established network of private M&A targets UHG in 2021 Georgia North Carolina Florida ~1,705 Closings ~$433M Revenue Tennessee Alabama Virginia Note: UHG Management believes that being
Slide 32: United Home Group of Tomorrow
(1)(2) United Home Group of Tomorrow 32 Opportunity to develop UHG into a premier Southeast homebuilder Virginia 1% market share of 2022 starts: 413 Implied Revenue: ~$123 million Targeting a Strategic Acquisition Strategy in One of the Fastest North Carolina Growing Regions in the United States 1%
Slide 33: Illustrative Financial Upside from M&A Strategy
33 Illustrative Financial Upside from M&A Strategy Significant potential upside from M&A opportunities Illustrative EBITDA Uplift from M&A Incremental Closings & EBITDA Added from Homebuilder Acquisitions(1)(2) +13% Upside EBITDA Uplift $133.4 Acquiring small to mid-size +10% Upside Baseline EBITDA
Slide 34: Build-to-Rent (BTR) Strategy Overview
Build-to-Rent (“BTR”) Strategy Overview 34 Differentiated strategy offers a hedge to traditional for sale business UHG’s programmatic BTR strategy is centered upon scalable Strategic Relationships relationships with single-family rental (“SFR”) operators & investors Develop Purpose Built Rental Focu
Slide 35: Homeowners Mortgage JV
35 Homeowners MortgageTM JV Improved sales, enhanced customer experience & incremental revenues with higher ROE Illustrative 2023 Unit Economics With Minimal Overhead Costs(1) ~$5k Mortgage Revenue Minimal capital required to create ~$273k Per Unit(3) scalable mortgage JV that has Mortgage LTV Per U
Slide 36: V. Financial Summary
V. Financial Summary
Slide 37: Historical Backlog & Revenue Relationship
37 Historical Backlog & Revenue Relationship UHG's backlog provides a clear line of sight to future revenue (Cancellations as a ($ in Millions) Percent of Backlog) $300 Backlog 25% Homebuilder backlog has a direct Cancellations % of Backlog correlation to future closings and revenue $252 over a 6-to
Slide 38: Financial Forecast
38 Financial Forecast(1) High growth end markets and community plans position UHG for solid growth ($ millions) FY 2021A FY 2022E FY 2023E Total Closings 1,705 1,736 2,074 Revenue $432.9 $515.5 $630.2 YoY Growth 32% 19% 22% Cost of Goods Sold 332.3 375.9 460.5 Gross Profit $100.6 $139.6 $169.7 Gross
Slide 39: Valuation & Operational Benchmarking
39 Valuation & Operational Benchmarking(1) UHG compared to the land-light homebuilder peer group 2023E EV / EBITDA(2) 2023E Gross Margin(3) 2023E EBITDA Margin 8.5x 26.9% 23.9% 19.1% 18.8% 18.4% 5.1x 4.8x 11.6% UHG NVR DFH UHG NVR DFH UHG NVR DFH 2022E EV / EBITDA(2) 2022E Gross Margin(3) 2022E EBIT
Slide 40: Reconciliations of Non-GAAP Metrics
40 Reconciliations of Non-GAAP Metrics(1)(2) ($ millions) FY 2021A FY 2022E FY 2023E Adjusted Gross Profit Revenue $432.9 $515.5 $630.2 Cost of Goods Sold 332.3 375.9 460.5 Add: Mark Up on Self Developed Lots 4.2 0.0 0.0 Less: Interest Expense (3.6) (4.9) (7.8) Adjusted Cost of Goods Sold $332.9 $37
Slide 41: Financial Model Assumptions
41 Financial Model Assumptions Financial Projections • Included in this Presentation are the UHG’s estima tes of its financia l performance for fiscal years 2022 through 2023 (the “ Financ ial Projections”), based on information known a s of the date of this Presenta tion. For more information rela
Slide 42: Summary Risk Factors
Summary Risk Factors Unless the context requires otherwise, references to “UHG,” “we,” “us” or “our” in this section are to Great Southern Homes, Inc. prior to the potential business combination (the “Potential Business Combination”) and to the combined c ompa ny following the Business Combina tion
Slide 43: Risk Factors
Risk Factors Risks Related to UHG’s Business and Industry (continued) • Supply shortages and other risks related to acquiring land, building materials and skilled la bor c ould increase UHG’s costs a nd delay deliveries causing a n adverse effect its business or financial results. • UHG is required
Slide 44: Risk Factors
Risk Factors Risks Related to the Potential Business Combination, DiamondHead and the Post-Combination Company • The consummation of the Potential Business Combination is subject to a number of conditions. If those conditions are not satisfied or waived, the Potentia l Business Combination may not b
Slide 45: Risk Factors
Risk Factors Risks Related to Redemption • Significant redemptions among Dia mondHead’s public stockholders may require the post-combination Company to raise future fina ncing after the closing of the Business Combination. • There is no guarantee tha t a public stockholder’ s dec ision whether to re
Slide 46: Disclaimer
Disclaimer About this Presentation • This presentation ( together with ora l sta tements ma de in connec tion herewith, this “Presenta tion”) is provided for informational purposes only. This Presentation shall not constitute an offer to sell, or the solicita tion of an offer to buy, any securities,
Slide 47: Disclaimer
Disclaimer Use of Data • Certain information c onta ined in this Presenta tion rela tes to or is based on the Company's own internal estimates and research. In addition, a ll of the market data included in this Presenta tion involves a number of assumptions and limita tions, and there can be no guar
Slide 48: Disclaimer
Disclaimer Additional Information • The Company intends to file with the SEC a proxy sta tement / prospectus on Form S-4 relating to the Proposed Business Combina tion, which will be mailed to DiamondHead’s shareholders once definitive. This Presenta tion does not conta in a ll the informa tion that
Slide 49: Disclaimer
Disclaimer Use of Projections • This Presentation conta ins financia l forecasts with respect to UHG’s projec ted financia l results for fiscal years 2022 through 2023. All projections, estima tes, goa ls, targets, plans, trends or other statements with respect to future results or future events in