M.D.C. HOLDINGS ANNOUNCES THIRD QUARTER 2022 RESULTS
10/27/2022 - 06:00 AM
DENVER , Oct. 27, 2022 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended September 30, 2022 .
"MDC posted strong top line growth in the third quarter of 2022, with home sale revenues increasing 12% year-over-year to $1.4 billion ," said MDC's Executive Chairman, Larry A. Mizel . "Home sale gross margins were 22.7% , while net income came in at $144 million , or $1.98 per diluted share for the quarter. Excluding impairments, home sale gross margins expanded 120 basis points year-over-year to 24.7% . These results are a testament to the solid execution of our teams in the field and our organization's ability to deliver homes in a challenging market environment."
Mr. Mizel continued, "Interest rate volatility and overall economic uncertainty took a toll on our sales efforts in the third quarter, as we experienced a slowdown in demand coupled with a sharp increase in cancellations. Buyer psychology continued to be adversely affected by the negative news flow surrounding housing market conditions and the overall economy, leading to a disappointing net order result for the quarter. While we believe that the long-term outlook for new home construction is positive and that there is a strong desire to own a home in this country, we expect near-term demand trends to remain challenged until interest rates stabilize."
Mr. Mizel concluded, "In light of these developments, MDC has increasingly shifted its focus to cash flow generation, balance sheet preservation and cost rationalization, while making adjustments to our sales efforts to stay competitive in the market. Our company is led by seasoned operators who have been through several market corrections and who know how to navigate challenging market environments. While there is a lot of uncertainty in today's market, I am confident that MDC has the operational discipline and balance sheet strength for what comes next."
"MDC demonstrated solid execution in the third quarter of 2022, as we once again delivered on our stated guidance for home closings, home sales gross margin excluding impairments and average closing prices for the quarter," said David Mandarich , MDC's President and Chief Executive Officer. "As we worked tirelessly to complete and close homes in backlog during the quarter, we also focused our sales efforts on inventory that can close this year, which is consistent with our focus on cash flow, and we anticipate that this will remain the case through the end of the year. However, we are offering great opportunities for our build-to-order buyers, such as long-term interest rate lock programs and other special incentives. As we close more of our legacy backlog and open new communities ahead of the spring selling season, we will continue to evaluate market conditions and remain committed to taking actions that support the health of our sales pace, our backlog and our balance sheet."
2022 Third Quarter Highlights and Comparisons to 2021 Third Quarter
Home sale revenues increased 12% to $1.41 billion from $1.26 billion Average selling price of deliveries up 13% to $590,000 Unit deliveries down 1% to 2,387 Homebuilding pretax income increased 2% to $168.2 million from $165.2 million Gross margin from home sales decreased 80 basis points to 22.7% from 23.5% Project abandonment expense of $11.8 million in Q3 2022 vs. $1.4 million in Q3 2021 Inventory impairments of $28.4 million in Q3 2022 Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") increased by 40 basis points to 10.0% Net income of $144.4 million , or $1.98 per diluted share, down 1% from $146.0 million or $1.99 per diluted share Effective tax rate of 22.3% vs. 24.3% Dollar value of net new orders decreased 88% to $152.8 million from $1.31 billion Unit gross orders decreased 47% to 1,569 Cancellations as a percentage of beginning backlog increased 970 basis points to 17.1% from 7.4% Gross order average selling price up approximately 4% to $583,000 Dollar value of ending backlog down 25% to $3.20 billion from $4.24 billion Average selling price of homes in backlog up 8% to $599,000 Unit backlog decreased 30% to 5,338 2022 Outlook and Other Selected Information 1
Projected home deliveries for the 2022 fourth quarter between 2,200 and 2,500 Projected average selling price for 2022 fourth quarter unit deliveries between $570,000 and $580,000 Projected gross margin from home sales for the 2022 fourth quarter between 20.0% and 22.0% (excluding impairments and warranty adjustments) Active subdivision count at September 30, 2022 of 220, up 8% year-over-year Lots controlled of 29,256 at September 30, 2022 , down 20% year-over-year Quarterly cash dividend of fifty cents ($0.50) per share declared on October 24, 2022 Consistent dividend program for over 25 years Quarterly dividend has doubled over the past five years 1 See "Forward-Looking Statements" below.
About MDC
M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have built and financed the American Dream for more than 230,000 homebuyers since 1977. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States . Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs , Salt Lake City , Las Vegas , Phoenix , Tucson , Riverside -San Bernardino , Los Angeles , San Diego , Orange County , San Francisco Bay Area , Sacramento , Washington D.C. , Baltimore , Orlando , Jacksonville , Seattle , Portland , Boise , Nashville , Austin , Albuquerque and Huntsville . The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.com .
Forward-Looking Statements
Certain statements in this release, including any statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of MDC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, (1) general economic conditions, including the impact of the COVID-19 pandemic, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including restrictions on business activities resulting from the COVID-19 pandemic, cancellation rates, net home orders, home gross margins, land and home values and subdivision counts; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of MDC's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican Mortgage Corporation's sale of mortgage loans (6) the relative stability of debt and equity markets; (7) competition; (8) the availability and cost of land and other raw materials used by MDC in its homebuilding operations; (9) the availability and cost of performance bonds and insurance covering risks associated with our business; (10) shortages and the cost of labor; (11) weather related slowdowns and natural disasters; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including orders addressing the COVID-19 pandemic, the interpretation of tax, labor and environmental laws; (15) terrorist acts and other acts of war; (16) changes in energy prices; and (17) other factors over which MDC has little or no control. Additional information about the risks and uncertainties applicable to MDC's business is contained in MDC's Form 10-Q for the quarter ended September 30, 2022, which is scheduled to be filed with the Securities and Exchange Commission today. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. MDC undertakes no duty to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or webcasts should be consulted.
M.D.C. HOLDINGS, INC. Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues
$ 1,407,642
$ 1,257,701
$ 4,098,985
$ 3,667,332
Home cost of sales
(1,059,996)
(962,078)
(3,043,390)
(2,827,147)
Inventory impairments
(28,415)
—
(29,075)
—
Total cost of sales
(1,088,411)
(962,078)
(3,072,465)
(2,827,147)
Gross profit
319,231
295,623
1,026,520
840,185
Selling, general and administrative expenses
(141,435)
(120,116)
(404,598)
(363,970)
Loss on debt retirement
—
(12,150)
—
(12,150)
Interest and other income
2,220
3,149
3,797
4,984
Other expense
(11,800)
(1,354)
(28,733)
(2,881)
Homebuilding pretax income
168,216
165,152
596,986
466,168
Financial Services:
Revenues
34,101
43,104
99,461
121,445
Expenses
(18,704)
(16,377)
(54,440)
(47,922)
Other income, net
2,176
813
4,627
2,855
Financial services pretax income
17,573
27,540
49,648
76,378
Income before income taxes
185,789
192,692
646,634
542,546
Provision for income taxes
(41,389)
(46,738)
(164,271)
(131,550)
Net income
$ 144,400
$ 145,954
$ 482,363
$ 410,996
Comprehensive income
$ 144,400
$ 145,954
$ 482,363
$ 410,996
Earnings per share:
Basic
$ 2.03
$ 2.07
$ 6.78
$ 5.83
Diluted
$ 1.98
$ 1.99
$ 6.59
$ 5.62
Weighted average common shares outstanding:
Basic
70,880,405
70,301,085
70,829,761
70,130,853
Diluted
72,729,453
72,800,011
72,892,635
72,770,432
Dividends declared per share
$ 0.50
$ 0.40
$ 1.50
$ 1.17
M.D.C. HOLDINGS, INC. Consolidated Balance Sheets (Unaudited)
September 30, 2022
December 31, 2021
(Dollars in thousands, except
per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents
$ 417,298
$ 485,839
Restricted cash
4,657
12,799
Marketable securities
198,016
—
Trade and other receivables
118,180
98,580
Inventories:
Housing completed or under construction
2,233,908
1,917,616
Land and land under development
1,808,526
1,843,235
Total inventories
4,042,434
3,760,851
Property and equipment, net
63,333
60,561
Deferred tax asset, net
22,122
17,942
Prepaids and other assets
78,821
106,562
Total homebuilding assets
4,944,861
4,543,134
Financial Services:
Cash and cash equivalents
34,486
104,821
Marketable securities
94,192
—
Mortgage loans held-for-sale, net
190,833
282,529
Other assets
67,441
33,044
Total financial services assets
386,952
420,394
Total Assets
$ 5,331,813
$ 4,963,528
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable
$ 153,003
$ 149,488
Accrued and other liabilities
364,284
370,910
Revolving credit facility
10,000
10,000
Senior notes, net
1,482,374
1,481,781
Total homebuilding liabilities
2,009,661
2,012,179
Financial Services:
Accounts payable and accrued liabilities
116,734
97,903
Mortgage repurchase facility
196,214
256,300
Total financial services liabilities
312,948
354,203
Total Liabilities
2,322,609
2,366,382
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding
—
—
Common stock, $0.01 par value; 250,000,000 shares authorized; 71,254,143 and 70,668,093 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
713
707
Additional paid-in-capital
1,745,750
1,709,276
Retained earnings
1,262,741
887,163
Total Stockholders' Equity
3,009,204
2,597,146
Total Liabilities and Stockholders' Equity
$ 5,331,813
$ 4,963,528
M.D.C. HOLDINGS, INC. Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(Dollars in thousands)
Operating Activities:
Net income
$ 144,400
$ 145,954
$ 482,363
$ 410,996
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense
25,555
7,965
50,348
26,832
Depreciation and amortization
6,760
7,752
20,663
23,930
Inventory impairments
28,415
—
29,075
—
Gain on sale of other assets
—
(2,014)
—
(2,014)
Amortization of discount of marketable debt securities
(1,082)
—
(1,082)
—
Loss on debt retirement
—
12,150
—
12,150
Deferred income tax benefit
(5,387)
(1,508)
(4,180)
(4,847)
Net changes in assets and liabilities:
Trade and other receivables
3,011
1,576
(19,321)
(55,529)
Mortgage loans held-for-sale, net
(763)
(62,835)
91,696
(16,365)
Housing completed or under construction
149,218
(75,407)
(319,083)
(461,105)
Land and land under development
(117,282)
(155,141)
9,018
(118,762)
Prepaids and other assets
(2,275)
5,224
(8,050)
9,919
Accounts payable and accrued other liabilities
(57,677)
17,678
12,506
88,273
Net cash provided by (used in) operating activities
172,893
(98,606)
343,953
(86,522)
Investing Activities:
Purchases of marketable securities
(291,126)
—
(291,126)
—
Proceeds from sale of other assets
—
2,014
—
2,014
Purchases of property and equipment
(7,731)
(9,581)
(21,429)
(23,028)
Net cash (used in) investing activities
(298,857)
(7,567)
(312,555)
(21,014)
Financing Activities:
Proceeds from (payments on) mortgage repurchase facility, net
20,649
51,113
(60,086)
13,404
Repayment of senior notes
—
(136,394)
—
(136,394)
Proceeds from issuance of senior notes
—
346,937
—
694,662
Dividend payments
(35,622)
(28,276)
(106,785)
(83,189)
Payments of deferred financing costs
—
(901)
—
(1,720)
Issuance of shares under stock-based compensation programs, net
1,141
(19)
(11,545)
(15,553)
Net cash provided by (used in) financing activities
(13,832)
232,460
(178,416)
471,210
Net increase (decrease) in cash, cash equivalents and restricted cash
(139,796)
126,287
(147,018)
363,674
Cash, cash equivalents and restricted cash:
Beginning of period
596,237
741,359
603,459
503,972
End of period
$ 456,441
$ 867,646
$ 456,441
$ 867,646
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents
$ 417,298
$ 761,715
$ 417,298
$ 761,715
Restricted cash
4,657
12,047
4,657
12,047
Financial Services:
Cash and cash equivalents
34,486
93,884
34,486
93,884
Total cash, cash equivalents and restricted cash
$ 456,441
$ 867,646
$ 456,441
$ 867,646
New Home Deliveries
Three Months Ended September 30,
2022
2021
% Change
Homes
Home Sale
Revenues
Average
Price
Homes
Home Sale
Revenues
Average
Price
Homes
Home
Sale
Revenues
Average Price
(Dollars in thousands)
West
1,312
$ 772,356
$ 588.7
1,376
$ 729,777
$ 530.4
(5) %
6 %
11 %
Mountain
647
424,397
655.9
666
379,041
569.1
(3) %
12 %
15 %
East
428
210,889
492.7
377
148,883
394.9
14 %
42 %
25 %
Total
2,387
$ 1,407,642
$ 589.7
2,419
$ 1,257,701
$ 519.9
(1) %
12 %
13 %
Nine Months Ended September 30,
2022
2021
% Change
Homes
Home Sale
Revenues
Average
Price
Homes
Home Sale
Revenues
Average
Price
Homes
Home
Sale
Revenues
Average Price
(Dollars in thousands)
West
3,926
$ 2,267,946
$ 577.7
4,324
$ 2,194,071
$ 507.4
(9) %
3 %
14 %
Mountain
1,860
1,196,526
643.3
1,989
1,104,391
555.2
(6) %
8 %
16 %
East
1,370
634,513
463.1
1,006
368,870
366.7
36 %
72 %
26 %
Total
7,156
$ 4,098,985
$ 572.8
7,319
$ 3,667,332
$ 501.1
(2) %
12 %
14 %
Net New Orders
Three Months Ended September 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price 1
Monthly
Absorption
Rate 2
Homes
Dollar Value
Average Price 1
Monthly
Absorption Rate 2
Homes
Dollar Value
Average Price
Monthly
Absorption
Rate
(Dollars in thousands)
West
193
$ 93,481
$ 484.4
0.51
1,437
$ 783,072
$ 544.9
4.91
(87) %
(88) %
(11) %
(90) %
Mountain
(3)
2,838
N/A
(0.02)
505
323,018
639.6
2.99
(101) %
(99) %
N/A
(101) %
East
109
56,514
518.5
1.01
457
199,985
437.6
3.67
(76) %
(72) %
18 %
(73) %
Total
299
$ 152,833
$ 511.1
0.46
2,399
$ 1,306,075
$ 544.4
4.10
(88) %
(88) %
(6) %
(89) %
1 Gross order average selling price for the three months ended September 30, 2022 increased approximately 4% year-over-year to $583,000.
Nine Months Ended September 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price
Monthly
Absorption
Rate 2
Homes
Dollar Value
Average Price
Monthly
Absorption Rate 2
Homes
Dollar Value
Average Price
Monthly
Absorption
Rate
(Dollars in thousands)
West
2,754
$ 1,677,039
$ 608.9
2.66
4,814
$ 2,613,279
$ 542.8
5.42
(43) %
(36) %
12 %
(51) %
Mountain
1,194
811,860
679.9
2.52
2,222
1,375,442
619.0
4.35
(46) %
(41) %
10 %
(42) %
East
906
457,919
505.4
2.80
1,286
558,716
434.5
3.91
(30) %
(18) %
16 %
(28) %
Total
4,854
$ 2,946,818
$ 607.1
2.64
8,322
$ 4,547,437
$ 546.4
4.82
(42) %
(35) %
11 %
(45) %
2 Calculated as total net new orders (gross orders less cancellations) in period ÷ average active communities during period ÷ number of months in period
Active Subdivisions
Average Active Subdivisions
Average Active Subdivisions
Active Subdivisions
Three Months Ended
Nine Months Ended
September 30,
%
September 30,
%
September 30,
%
2022
2021
Change
2022
2021
Change
2022
2021
Change
West
132
104
27 %
127
98
30 %
115
99
16 %
Mountain
51
56
(9) %
52
56
(7) %
53
57
(7) %
East
37
43
(14) %
36
42
(14) %
36
37
(3) %
Total
220
203
8 %
215
196
10 %
204
193
6 %
Backlog
September 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
(Dollars in thousands)
West
3,044
$ 1,762,858
$ 579.1
4,200
$ 2,295,570
$ 546.6
(28) %
(23) %
6 %
Mountain
1,508
1,038,037
688.4
2,251
1,408,945
625.9
(33) %
(26) %
10 %
East
786
396,406
504.3
1,207
537,983
445.7
(35) %
(26) %
13 %
Total
5,338
$ 3,197,301
$ 599.0
7,658
$ 4,242,498
$ 554.0
(30) %
(25) %
8 %
Homes Completed or Under Construction (WIP lots)
September 30,
%
2022
2021
Change
Unsold:
Completed
187
21
790 %
Under construction
895
345
159 %
Total unsold started homes
1,082
366
196 %
Sold homes under construction or completed
5,094
6,468
(21) %
Model homes under construction or completed
532
490
9 %
Total homes completed or under construction
6,708
7,324
(8) %
Lots Owned and Optioned (including homes completed or under construction)
September 30, 2022
September 30, 2021
Lots
Owned
Lots
Optioned
Total
Lots
Owned
Lots
Optioned
Total
Total
% Change
West
13,893
914
14,807
14,209
5,811
20,020
(26) %
Mountain
6,151
2,458
8,609
6,258
4,236
10,494
(18) %
East
3,848
1,992
5,840
3,824
2,328
6,152
(5) %
Total
23,892
5,364
29,256
24,291
12,375
36,666
(20) %
Selling, General and Administrative Expenses
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
Change
2022
2021
Change
(Dollars in thousands)
General and administrative expenses
$ 80,858
$ 59,935
$ 20,923
$ 225,735
$ 179,056
$ 46,679
General and administrative expenses as a percentage of home sale revenues
5.7 %
4.8 %
90 bps
5.5 %
4.9 %
60 bps
Marketing expenses
$ 26,355
$ 25,660
$ 695
$ 78,022
$ 78,195
$ (173)
Marketing expenses as a percentage of home sale revenues
1.9 %
2.0 %
-10 bps
1.9 %
2.1 %
-20 bps
Commissions expenses
$ 34,222
$ 34,521
$ (299)
$ 100,841
$ 106,719
$ (5,878)
Commissions expenses as a percentage of home sale revenues
2.4 %
2.7 %
-30 bps
2.5 %
2.9 %
-40 bps
Total selling, general and administrative expenses
$ 141,435
$ 120,116
$ 21,319
$ 404,598
$ 363,970
$ 40,628
Total selling, general and administrative expenses as a percentage of home sale revenues
10.0 %
9.6 %
40 bps
9.9 %
9.9 %
0 bps
Capitalized Interest
Three Months Ended September 30,
Nine Months Ended September 30,
2022
2021
2022
2021
(Dollars in thousands)
Homebuilding interest incurred
$ 17,391
$ 19,108
$ 52,031
$ 53,849
Less: Interest capitalized
(17,391)
(19,108)
(52,031)
(53,849)
Homebuilding interest expensed
$ —
$ —
$ —
$ —
Interest capitalized, beginning of period
$ 62,169
$ 54,351
$ 58,054
$ 52,777
Plus: Interest capitalized during period
17,391
19,108
52,031
53,849
Less: Previously capitalized interest included in home cost of sales
(15,977)
(16,024)
(46,502)
(49,191)
Interest capitalized, end of period
$ 63,583
$ 57,435
$ 63,583
$ 57,435
Reconciliation of Non-GAAP Financial Measures
"Gross Margin from Home Sales Excluding Inventory Impairments," "Gross Margin from Home Sales Excluding Inventory Impairments and Warranty Adjustments" and "Gross Margin from Home Sales Excluding Inventory Impairments, Warranty Adjustments, and Interest in Cost of Sales" are non-GAAP financial measures, and should not be considered in isolation or as an alternative to performance measures prescribed by GAAP. The table below reconciles each of these non-GAAP financial measures to gross margin as calculated based on GAAP. We believe this information is relevant and meaningful as it provides our investors and analysts with the impact that interest, warranty and impairments have on our Gross Margin from Home Sales and permits investors to make better comparisons with our competitors, who also break out and adjust gross margins in a similar fashion.
Three Months Ended
Gross
Gross
September 30,
Margin
September 30,
Margin
2022
%
2021
%
(Dollars in thousands)
Gross Margin from Home Sales
$
319,231
22.7 %
$
295,623
23.5 %
Add: Inventory Impairments
28,415
—
Gross Margin from Home Sales Excluding Inventory Impairments
347,646
24.7 %
295,623
23.5 %
Add: Warranty Adjustments
523
319
Gross Margin from Home Sales Excluding Inventory Impairments and Warranty Adjustments
348,169
24.7 %
295,942
23.5 %
Add: Interest in Cost of Sales
15,977
16,024
Gross Margin from Home Sales Excluding Inventory Impairments, Warranty Adjustments and Interest in Cost of Sales
$
364,146
25.9 %
$
311,966
24.8 %
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SOURCE M.D.C. Holdings, Inc.