PulteGroup : Q3 2019 PulteGroup, Inc. Earnings Conference Call - Presentation

Report on Third Quarter 2019 Operating and Financial Results

Forward-Looking Statements

This press release includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "plan," "project," "may," "can," "could," "might," "should", "will" and similar expressions identify forward-looking statements, including statements related to any impairment charge and the impacts or effects thereof, expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our homebuilding operations; the impact of any changes to our strategy in responding to the cyclical nature of the industry, including any changes regarding our land positions and the levels of our land spend; the availability and cost of insurance covering risks associated with our businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws which could have a greater impact on our effective tax rate or the value of our deferred tax assets than we anticipate; economic changes nationally or in our local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and other public filings with the Securities and Exchange Commission (the "SEC") for a further discussion of these and other risks and uncertainties applicable to our businesses. PulteGroup undertakes no duty to update any forward-looking statement, whether as a result of new information, future events or changes in PulteGroup's expectations.

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PulteGroup Call Participants

Ryan	Bob	Jim	Jim
Marshall	O'Shaughnessy	Ossowski	Zeumer
President and	Executive	Senior Vice	Vice President,
CEO	Vice President	President,	Investor
	and CFO	Finance	Relations

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Review of Q3 2019 Results

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Q3 2019 Financial Highlights

• Reported Q3 earnings of $0.99 per share; adjusted earnings of $1.01 per share
• • Adjusted earnings exclude a $9 millionpre-tax warranty charge related to a closed-out community
  • Prior year reported earnings were $1.01 per share
• Home sale revenues of $2.6 billion
• • Closings increased 3% over prior year to 6,186 homes
  • Comparable ASP or $426,000
• Reported home sale gross margin of 23.1%; adjusted home sale gross margin of 23.4%

Home Sale Revenues ($B)

		Unit Closings
	Q1	Q2	Q3	Q4
2018	4,626	5,741	6,031	6,709
2019	4,635	5,589	6,186	-
Change	-	-3%	3%	-

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Q3 2019 Financial Highlights

• Net neworders increased 13% to 6,031 homes
• • Highest Q3 order rate in over a decade
  • 13% increase over prior year is largest percentage gain since 2017
• Value of net new orders increased by 11% to $2.5 billion
• Unit backlog increased 4% to 11,638 homes
• • Backlog value up 2% over prior year to $5.0 billion

		Net New Orders
	Q1	Q2	Q3	Q4
2018	6,875	6,341	5,350	4,267
2019	6,463	6,792	6,031	-
Change	-6%	7%	13%	-

Unit Backlog

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Increasing Presence Among First-Time Buyers

• 34% of lots under control targetfirst-time buyers
• Q3 land acq. & development investment of $693 million
• • Approved new deals in the third quarter that control 8,800
• 161,000 lots under control
• • 42% of lots held via option

Lots Under Control by Buyer Group

Lots Under Control

Financial Strength and Flexibility

• Debt-to-totalcapital ratio down to 34.6%
• • $769 million of cash and net debt-to-total capital ratio of 27.6%
• $337 million returned to share- holders through dividends and share repurchases in the first nine months of 2019

Returning Capital to Shareholders

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Q3 2019 Selected Financial Data

	Three Months Ended
	September 30,
	2019	2018
Home Sale Revenues ($ millions)	$2,637	$2,572
Home Sale Gross Margin	23.1%	24.0%
Adjusted Home Sale Gross Margin	23.4%	24.0%
Reported Net Income ($ millions)	$273	$290
Reported Diluted Earnings Per Share	$0.99	$1.01
Adjusted Net Income ($ millions)	$280	$290
Adjusted Diluted Earnings Per Share	$1.01	$1.01
Backlog (Units)	11,638	11,164
Backlog Value ($ millions)	$5,011	$4,911

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Q3 2019 Selected Balance Sheet Data

	September 30, 2019	December 31, 2018
	($ millions)	($ millions)
Cash and Equivalents	$769	$1,134
(including restricted cash)
House and Land Inventory	$7,830	$7,253
Notes Payable	$2,744	$3,028
Shareholders' Equity	$5,182	$4,818
Debt - to - Total Capital Ratio	34.6%	38.6%
Net Debt - to - Total Capital	27.6%	28.2%
Ratio

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Appendix

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PulteGroup, Inc.

Reconciliation of Non-GAAP Financial Measures (Unaudited)

This report contains information about our operating results reflecting certain adjustments, including: adjustments to gross margin; income tax expense; net income; and diluted earnings per share ("EPS"). These measures are considered non-GAAP financial measures under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures as measures of our profitability. We believe that reflecting these adjustments provides investors relevant and useful information for evaluating the comparability of financial information presented and comparing our profitability to other companies in the homebuilding industry. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate these measures and any adjustments thereto before comparing our measures to those of such other companies.

The following tables set forth a reconciliation of the non-GAAP financial measures to the GAAP financial measures that management believes to be most directly comparable ($000's omitted):

Net income, as reported

Adjustments to income before income taxes: Warranty claim

Income tax effect of the above item

Adjusted net income

EPS (diluted), as reported

Adjusted EPS (diluted)

						Three Months Ended
						September 30,
Results of Operations Classification			2019				2018
$		273,104	$	289,535
	Home sale cost of revenues	8,956				-
	Income tax expense		(2,229)				-
$		279,831	$	289,535
$		0.99	$	1.01
$		1.01	$	1.01
	Three Months Ended
	September 30,
	2019						2018

Home sale revenues

Gross margin, as reported (a)

Adjustments:

Warranty claim

Adjusted gross margin

• 2,637,002

$	608,380	23.1	%
	8,956	0.3	%
$	617,336	23.4	%

• 2,572,236

$	618,076	24.0	%
	-	- %
$	618,076	24.0	%

(a) Gross margin represents home sale revenues minus home sale cost of revenues

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Third Quarter 2019 Earnings

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