M D C : ANNOUNCES SECOND QUARTER 2022 RESULTS - Form 8-K
July 28, 2022 at 06:26 am EDT
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M.D.C. HOLDINGS ANNOUNCES SECOND QUARTER 2022 RESULTS
Home sale revenues growth and a 370 basis point expansion of our gross margin from home sales to 26.8% resulted in a 23% increase in net income for the quarter.
DENVER, COLORADO, Thursday, July 28, 2022. M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended June 30, 2022.
"MDC delivered another quarter of strong profitability in the second quarter of 2022, generating earnings of $2.59 per diluted share, which represented a 23% increase over the second quarter of 2021," said MDC's Executive Chairman, Larry A. Mizel. "Our teams did an excellent job of executing during the quarter as we met or exceeded our stated guidance for deliveries, average sales price and home sales gross margin during what has become a more challenging operating environment. We also ended the quarter with a sold backlog value of over $4.44 billion, which was 8% higher on a year-over-year basis."
Mr. Mizel continued, "We experienced a year-over-year decline in net orders during the quarter, driven by a slowdown in demand, an uptick in cancellations and difficult order comparisons from the prior year period. The sharp increase in interest rates combined with a more uncertain economic outlook has taken a toll on consumer confidence, which is reflected in our net orders in the quarter. We believe these headwinds may persist for at least the remainder of the year and we are actively adjusting our operations to reflect this new reality."
Mr. Mizel concluded, "Fortunately, MDC is led by one of the most seasoned management teams in the industry, which gives us great perspective on housing market cycles and how to navigate them. We enter this period of uncertainty from a position of strength, with a debt-to-capital ratio of 34%, total available liquidity of $1.74 billion and no senior note maturities due until 2030. In addition, the gross margin of homes in backlog at the end of the quarter remained healthy, giving us a solid runway for continued strong operating profitability as we head into the back half of the year."
"After several consecutive quarters of increasing prices and strong demand, we experienced a noticeable decline in sales activity in the second quarter of 2022," said David Mandarich, MDC's President and Chief Executive Officer. "We believe this was a natural reaction to the rapid rise in mortgage rates and reduced consumer confidence that took place during the quarter, and one that will likely require some realignment by industry participants. While it's unclear how long it will take for the homebuilding market to regain its footing, we remain confident that our affordable product focus in strong markets has us well positioned for the future. In addition, our build-to-order strategy and limited amount of speculative inventory allow us to operate from a position of strength. As a result, we continue to see a bright long-term future ahead for MDC."
1
2022 Second Quarter Highlights and Comparisons to 2021 Second Quarter
•Home sale revenues increased 6% to $1.45 billion from $1.37 billion
◦Average selling price of deliveries up 14% to $572,000
◦Unit deliveries down 7% to 2,536
•Homebuilding pretax income increased 28% to $240.3 million from $187.5 million
◦Gross margin from home sales increased 370 basis points to 26.8% from 23.1%
◦Project abandonment expense of $15.5 million in Q2 2022 vs. $1.1 million in Q2 2021
•Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 20 basis points to 9.2%
•Net income of $189.5 million, or $2.59 per diluted share, up 23% from $154.4 million or $2.11 per diluted share
◦Effective tax rate of 26.8% vs. 24.9%
•Dollar value of net new orders decreased 40% to $882.1 million from $1.46 billion
◦Unit gross orders decreased 29% to 2,237
◦Cancellations as a percentage of beginning backlog increased 400 basis points to 9.7% from 5.7%
◦Average selling price of net orders up 16%
•Dollar value of ending backlog up 8% to $4.44 billion from $4.11 billion
◦Average selling price of homes in backlog up 12%
◦Unit backlog decreased 3% to 7,426
2022 Outlook and Other Selected Information1
•Projected home deliveries for the 2022 third quarter between 2,200 and 2,500
◦Projected average selling price for 2022 third quarter unit deliveries between $580,000 and $590,000
◦Projected gross margin from home sales for the 2022 third quarter between 24.5% and 25.5% (excluding impairments and warranty adjustments)
•Active subdivision count at June 30, 2022 of 207, up 11% year-over-year
•Lots controlled of 33,130 at June 30, 2022, down 4% year-over-year
•Quarterly cash dividend of fifty cents ($0.50) per share declared on July 25, 2022, up 25% year-over-year
◦Consistent dividend program for over 25 years
◦Quarterly dividend has more than doubled in the past five years
1 See "Forward-Looking Statements" below.
2
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 and Albuquerque. 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 June 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.
Contact: Robert N. Martin
Senior Vice President and Chief Financial Officer
1-866-424-3395
IR@mdch.com
3
M.D.C. HOLDINGS, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues
$
1,450,823
$
1,367,773
$
2,691,343
$
2,409,631
Home cost of sales
(1,062,016)
(1,051,181)
(1,983,394)
(1,865,069)
Inventory impairments
-
-
(660)
-
Total cost of sales
(1,062,016)
(1,051,181)
(1,984,054)
(1,865,069)
Gross profit
388,807
316,592
707,289
544,562
Selling, general and administrative expenses
(133,849)
(128,861)
(263,163)
(243,854)
Interest and other income
822
868
1,577
1,835
Other expense
(15,509)
(1,090)
(16,933)
(1,527)
Homebuilding pretax income
240,271
187,509
428,770
301,016
Financial Services:
Revenues
36,229
33,318
65,360
78,341
Expenses
(18,801)
(16,440)
(35,736)
(31,545)
Other income, net
1,264
1,155
2,451
2,042
Financial services pretax income
18,692
18,033
32,075
48,838
Income before income taxes
258,963
205,542
460,845
349,854
Provision for income taxes
(69,421)
(51,190)
(122,882)
(84,812)
Net income
$
189,542
$
154,352
$
337,963
$
265,042
Comprehensive income
$
189,542
$
154,352
$
337,963
$
265,042
Earnings per share:
Basic
$
2.66
$
2.19
$
4.75
$
3.76
Diluted
$
2.59
$
2.11
$
4.61
$
3.62
Weighted average common shares outstanding:
Basic
70,841,476
70,291,057
70,804,019
70,044,326
Diluted
72,881,012
72,715,273
72,945,748
72,754,141
Dividends declared per share
$
0.50
$
0.40
$
1.00
$
0.77
4
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited)
June 30,
2022
December 31,
2021
(Dollars in thousands, except
per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents
$
475,254
$
485,839
Restricted cash
5,994
12,799
Trade and other receivables
121,202
98,580
Inventories:
Housing completed or under construction
2,385,563
1,917,616
Land and land under development
1,717,022
1,843,235
Total inventories
4,102,585
3,760,851
Property and equipment, net
61,574
60,561
Deferred tax asset, net
16,735
17,942
Prepaids and other assets
95,956
106,562
Total homebuilding assets
4,879,300
4,543,134
Financial Services:
Cash and cash equivalents
114,989
104,821
Mortgage loans held-for-sale, net
190,070
282,529
Other assets
48,468
33,044
Total financial services assets
353,527
420,394
Total Assets
$
5,232,827
$
4,963,528
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable
$
186,252
$
149,488
Accrued and other liabilities
397,349
370,910
Revolving credit facility
10,000
10,000
Senior notes, net
1,482,174
1,481,781
Total homebuilding liabilities
2,075,775
2,012,179
Financial Services:
Accounts payable and accrued liabilities
107,170
97,903
Mortgage repurchase facility
175,565
256,300
Total financial services liabilities
282,735
354,203
Total Liabilities
2,358,510
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; 71,157,875 and 70,668,093 issued and outstanding at June 30, 2022 and December 31, 2021, respectively
712
707
Additional paid-in-capital
1,719,642
1,709,276
Retained earnings
1,153,963
887,163
Total Stockholders' Equity
2,874,317
2,597,146
Total Liabilities and Stockholders' Equity
$
5,232,827
$
4,963,528
5
M.D.C. HOLDINGS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(Dollars in thousands)
Operating Activities:
Net income
$
189,542
$
154,352
$
337,963
$
265,042
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense
9,911
8,941
24,793
18,867
Depreciation and amortization
7,251
9,175
13,903
16,178
Inventory impairments
-
-
660
-
Deferred income tax expense (benefit)
365
(1,991)
1,207
(3,339)
Net changes in assets and liabilities:
Trade and other receivables
(5,655)
(16,823)
(22,332)
(57,105)
Mortgage loans held-for-sale, net
(2,156)
44,703
92,459
46,470
Housing completed or under construction
(191,114)
(167,043)
(468,301)
(385,698)
Land and land under development
17,545
1,401
126,300
36,379
Prepaids and other assets
14,704
28,289
(5,775)
4,695
Accounts payable and accrued other liabilities
12,612
9,037
70,183
70,595
Net cash provided by operating activities
53,005
70,041
171,060
12,084
Investing Activities:
Purchases of property and equipment
(6,814)
(7,698)
(13,698)
(13,447)
Net cash (used in) investing activities
(6,814)
(7,698)
(13,698)
(13,447)
Financing Activities:
Proceeds from (payments on) mortgage repurchase facility, net
(2,666)
(52,801)
(80,735)
(37,709)
Proceeds from issuance of senior notes
-
-
-
347,725
Dividend payments
(35,580)
(28,248)
(71,163)
(54,913)
Payments of deferred financing costs
-
-
-
(819)
Issuance of shares under stock-based compensation programs, net
(58)
(16,543)
(12,686)
(15,534)
Net cash provided by (used in) financing activities
(38,304)
(97,592)
(164,584)
238,750
Net increase (decrease) in cash, cash equivalents and restricted cash
7,887
(35,249)
(7,222)
237,387
Cash, cash equivalents and restricted cash:
Beginning of period
588,350
776,608
603,459
503,972
End of period
$
596,237
$
741,359
$
596,237
$
741,359
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents
$
475,254
$
638,547
$
475,254
$
638,547
Restricted cash
5,994
14,158
5,994
14,158
Financial Services:
Cash and cash equivalents
114,989
88,654
114,989
88,654
Total cash, cash equivalents and restricted cash
$
596,237
$
741,359
$
596,237
$
741,359
6
New Home Deliveries
Three Months Ended June 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
1,371
$
788,279
$
575.0
1,672
$
847,683
$
507.0
(18)
%
(7)
%
13
%
Mountain
665
437,001
657.1
711
400,633
563.5
(6)
%
9
%
17
%
East
500
225,543
451.1
339
119,457
352.4
47
%
89
%
28
%
Total
2,536
$
1,450,823
$
572.1
2,722
$
1,367,773
$
502.5
(7)
%
6
%
14
%
Six Months Ended June 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
2,614
$
1,495,590
$
572.1
2,948
$
1,464,294
$
496.7
(11)
%
2
%
15
%
Mountain
1,213
772,129
636.5
1,323
725,350
548.3
(8)
%
6
%
16
%
East
942
423,624
449.7
629
219,987
349.7
50
%
93
%
29
%
Total
4,769
$
2,691,343
$
564.3
4,900
$
2,409,631
$
491.8
(3)
%
12
%
15
%
Net New Orders
Three Months Ended June 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price
Monthly
Absorption
Rate *
Homes
Dollar Value
Average Price
Monthly
Absorption Rate *
Homes
Dollar Value
Average Price
Monthly
Absorption
Rate
(Dollars in thousands)
West
857
$
543,584
$
634.3
2.45
1,602
$
850,742
$
531.0
5.67
(47)
%
(36)
%
19
%
(57)
%
Mountain
277
196,340
708.8
1.79
706
433,793
614.4
4.18
(61)
%
(55)
%
15
%
(57)
%
East
270
142,221
526.7
2.63
406
180,205
443.9
3.56
(33)
%
(21)
%
19
%
(26)
%
Total
1,404
$
882,145
$
628.3
2.31
2,714
$
1,464,740
$
539.7
4.80
(48)
%
(40)
%
16
%
(52)
%
Six Months Ended June 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price
Monthly
Absorption
Rate *
Homes
Dollar Value
Average Price
Monthly
Absorption Rate *
Homes
Dollar Value
Average Price
Monthly
Absorption
Rate
(Dollars in thousands)
West
2,561
$
1,574,372
$
614.7
3.91
3,377
$
1,791,809
$
530.6
5.73
(24)
%
(12)
%
16
%
(32)
%
Mountain
1,197
799,482
667.9
3.76
1,717
1,017,585
592.7
5.03
(30)
%
(21)
%
13
%
(25)
%
East
797
399,780
501.6
3.73
829
354,950
428.2
4.03
(4)
%
13
%
17
%
(7)
%
Total
4,555
$
2,773,634
$
608.9
3.83
5,923
$
3,164,344
$
534.2
5.21
(23)
%
(12)
%
14
%
(26)
%
*Calculated as total net new orders (gross orders less cancellations) in period ÷ average active communities during period ÷ number of months in period
7
Active Subdivisions
Average Active Subdivisions
Average Active Subdivisions
Active Subdivisions
Three Months Ended
Six Months Ended
June 30,
%
June 30,
%
June 30,
%
2022
2021
Change
2022
2021
Change
2022
2021
Change
West
122
91
34
%
117
94
24
%
109
98
11
%
Mountain
51
55
(7)
%
52
56
(7)
%
53
57
(7)
%
East
34
41
(17)
%
34
38
(11)
%
36
34
6
%
Total
207
187
11
%
203
188
8
%
198
189
5
%
Backlog
June 30,
2022
2021
% Change
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
Homes
Dollar
Value
Average
Price
(Dollars in thousands)
West
4,163
$
2,438,184
$
585.7
4,139
$
2,204,500
$
532.6
1
%
11
%
10
%
Mountain
2,158
1,450,194
672.0
2,412
1,426,496
591.4
(11)
%
2
%
14
%
East
1,105
549,721
497.5
1,127
482,736
428.3
(2)
%
14
%
16
%
Total
7,426
$
4,438,099
$
597.6
7,678
$
4,113,732
$
535.8
(3)
%
8
%
12
%
Homes Completed or Under Construction (WIP lots)
June 30,
%
2022
2021
Change
Unsold:
Completed
46
19
142
%
Under construction
607
214
184
%
Total unsold started homes
653
233
180
%
Sold homes under construction or completed
7,007
6,655
5
%
Model homes under construction or completed
524
502
4
%
Total homes completed or under construction
8,184
7,390
11
%
Lots Owned and Optioned (including homes completed or under construction)
June 30, 2022
June 30, 2021
Lots
Owned
Lots
Optioned
Total
Lots
Owned
Lots
Optioned
Total
Total
% Change
West
15,027
1,963
16,990
13,265
4,729
17,994
(6)
%
Mountain
6,696
2,961
9,657
6,599
4,174
10,773
(10)
%
East
4,111
2,372
6,483
3,636
1,997
5,633
15
%
Total
25,834
7,296
33,130
23,500
10,900
34,400
(4)
%
8
Selling, General and Administrative Expenses
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
Change
2022
2021
Change
(Dollars in thousands)
General and administrative expenses
$
72,894
$
61,958
$
10,936
$
144,877
$
119,121
$
25,756
General and administrative expenses as apercentage of home sale revenues
5.0
%
4.5
%
50 bps
5.4
%
4.9
%
50 bps
Marketing expenses
$
26,035
$
26,832
$
(797)
$
51,667
$
52,535
$
(868)
Marketing expenses as a percentage ofhome sale revenues
1.8
%
2.0
%
-20 bps
1.9
%
2.2
%
-30 bps
Commissions expenses
$
34,920
$
40,071
$
(5,151)
$
66,619
$
72,198
$
(5,579)
Commissions expenses as a percentage ofhome sale revenues
2.4
%
2.9
%
-50 bps
2.5
%
3.0
%
-50 bps
Total selling, general and administrative expenses
$
133,849
$
128,861
$
4,988
$
263,163
$
243,854
$
19,309
Total selling, general and administrativeexpenses as a percentage ofhome sale revenues
9.2
%
9.4
%
-20 bps
9.8
%
10.1
%
-30 bps
Capitalized Interest
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(Dollars in thousands)
Homebuilding interest incurred
$
17,382
$
17,409
$
34,640
$
34,741
Less: Interest capitalized
(17,382)
(17,409)
(34,640)
(34,741)
Homebuilding interest expensed
$
-
$
-
$
-
$
-
Interest capitalized, beginning of period
$
60,468
$
55,268
$
58,054
$
52,777
Plus: Interest capitalized during period
17,382
17,409
34,640
34,741
Less: Previously capitalized interest included in home cost of sales
(15,681)
(18,326)
(30,525)
(33,167)
Interest capitalized, end of period
$
62,169
$
54,351
$
62,169
$
54,351
9
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M.D.C. Holdings Inc. published this content on 28 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2022 10:24:41 UTC.
M.D.C. Holdings, Inc. is engaged in the business of homebuilding and financial services. The Company's segments include West, which includes operations in Arizona, California, Nevada, New Mexico, Oregon, Texas and Washington; Mountain, which includes operations in Colorado, Idaho and Utah, and East, which includes operations in Alabama, Florida, Maryland, Pennsylvania, Tennessee and Virginia. Its homebuilding segments include land acquisition and development, home construction, sales and marketing, and customer service. Its homebuilding subsidiaries build and sells single-family detached homes that are designed to meet local customer preferences. Its financial services operations include mortgage financing, place title insurance and homeowner insurance for its homebuyers, and provides general liability insurance for its subsidiaries and its subcontractors. Its financial services business includes HomeAmerican, Allegiant, StarAmerican, American Home Insurance, and American Home Title.