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M.D.C. HOLDINGS ANNOUNCES SECOND QUARTER 2022 RESULTS

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July 28, 2022 6:00 AM EDT

 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, July 28, 2022 /PRNewswire/ -- 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."

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.

About MDCM.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.

 

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

Three Months EndedJune 30,

Six Months EndedJune 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

 

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

 

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)

Three Months EndedJune 30,

Six Months EndedJune 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

 

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

AveragePrice

(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

AveragePrice

(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

DollarValue

Average Price

Monthly

AbsorptionRate *

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

AveragePrice

Monthly

Absorption Rate *

Homes

DollarValue

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

 

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) %

 

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 a percentage 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 of home 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 of home 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 administrative expenses as a percentage of home sale revenues

9.2 %

9.4 %

-20 bps

9.8 %

10.1 %

-30 bps

 

Capitalized Interest

Three Months EndedJune 30,

Six Months EndedJune 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

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/mdc-holdings-announces-second-quarter-2022-results-301594907.html

SOURCE M.D.C. Holdings, Inc.


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