M.D.C. HOLDINGS ANNOUNCES THIRD QUARTER 2023 RESULTS

News provided by

M.D.C. Holdings, Inc.

Oct 26, 2023, 06:00 ET

DENVER, Oct. 26, 2023 /PRNewswire/ -- Thursday, October 26, 2023. M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended September 30, 2023.

"MDC delivered another quarter of strong profitability, generating net income of $107.3 million, or $1.40 per diluted share for the third quarter of 2023," said MDC's Executive Chairman, Larry Mizel. "Home sale revenues were $1.09 billion on new home deliveries of 1,968 at an average sales price of $552,000. Gross margin from home sales improved 280 basis points from the second quarter of 2023 to 19.2%, while SG&A as a percent of home sale revenues improved on both a sequential and year-over-year basis to 9.3%. These results further demonstrate our ability to deliver solid profitability in a high interest rate environment."

"Net new orders improved considerably from the prior year period, thanks to a significant reduction in cancellations and our use of financing incentives that lessened the impact of higher mortgage rates for our buyers," said David Mandarich MDC's President and Chief Executive Officer. "Our sales pace for the quarter was 2.4 homes per community per month and was fairly consistent across our homebuilding footprint. We continue to see motivated buyers in our markets, provided we can meet their affordability needs."

"Despite the challenges that higher interest rates present, I remain confident in our company's outlook," said Mr. Mizel. "The US economy has shown great resilience in terms of GDP growth and job creation, while home prices nationally have held firm. The new home market continues to benefit from a lack of existing home supply, and large public builders like MDC are poised to gain market share. We plan on taking advantage of this opportunity in the coming quarters and therefore have increased our land acquisition efforts."

Mr. Mizel concluded, "Our average build time for homes that closed in the quarter improved significantly as compared to the second quarter. This improvement, coupled with our increased focus on spec home production, has led to better inventory turns and cash generation. Our cash and marketable securities balance at the end of the quarter stood at $1.78 billion, giving us ample liquidity to reinvest in our operations and pay our industry-leading dividend of $2.20 on an annualized basis. The progress we made this quarter has us well positioned to end 2023 on a strong note and carry the momentum into the new year."

2023 Third Quarter Highlights and Comparisons to 2022 Third Quarter

  • Home sale revenues of $1.09 billion compared to $1.41 billion
    • Unit deliveries of 1,968 vs. 2,387
    • Average selling price of deliveries of $552,000 vs. $590,000
  • Homebuilding pretax income of $127.4 million compared to $168.2 million
    • Gross margin from home sales of 19.2% vs. 22.7%
    • Inventory impairments of $6.2 million vs $28.4 million
    • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 9.3% vs. 10.0%
    • Project abandonment expense of $11.8 million in the third quarter of 2022
  • Financial services pretax income of $12.4 million compared to $17.6 million
  • Net income of $107.3 million, or $1.40 per diluted share, compared to $144.4 million, or $1.98 per diluted share
    • Effective tax rate of 23.2% vs 22.3%
  • Dollar value of net new orders increased 532% to $965.5 million from $152.8 million
    • Unit gross orders increased 42% to 2,227 from 1,569
    • Cancellations as a percentage of gross orders of 23.9% vs. 80.9%
    • Average selling price of gross orders decreased 4% to $560,000 from $583,000

2023 Outlook and Other Selected Information1

  • Projected home deliveries for the 2023 fourth quarter between 2,200 and 2,400
    • Projected average selling price for 2023 fourth quarter unit deliveries of between $545,000 and $555,000
    • Projected gross margin from home sales for the 2023 fourth quarter between 18.0% and 19.5% (assuming no impairments or warranty adjustments)
  • Active subdivision count at September 30, 2023 of 235, up 7% year-over-year
  • Lots controlled of 22,353 at September 30, 2023, down 24% year-over-year
  • Quarterly cash dividend of fifty-five cents ($0.55) per share declared on October 23, 2023
    • Consistent record of stable or increasing dividends for nearly 30 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 helped more than 240,000 homebuyers achieve the American Dream since 1977. One of the largest homebuilders in the nation, MDC is committed to quality and value that is reflected in each home its subsidiaries build. The Richmond American companies have operations in Alabama, Arizona, California, Colorado, Florida, Idaho, Maryland, Nevada, New Mexico, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia and Washington. Mortgage lending, insurance and title services are offered by the following MDC subsidiaries, respectively: HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company. M.D.C. Holdings, Inc. stock 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, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including 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, 2023, 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,


2023


2022


2023


2022










(Dollars in thousands, except per share amounts)

Homebuilding:








Home sale revenues

$      1,087,050


$      1,407,642


$      3,210,536


$      4,098,985

Home cost of sales

(872,624)


(1,059,996)


(2,622,362)


(3,043,390)

Inventory impairments

(6,200)


(28,415)


(27,500)


(29,075)

Total cost of sales

(878,824)


(1,088,411)


(2,649,862)


(3,072,465)

Gross profit

208,226


319,231


560,674


1,026,520

Selling, general and administrative expenses

(101,311)


(141,435)


(303,032)


(404,598)

Interest and other income

20,414


2,220


51,812


3,797

Other income (expense)

55


(11,800)


987


(28,733)

Homebuilding pretax income

127,384


168,216


310,441


596,986









Financial Services:








Revenues

23,769


34,101


85,874


99,461

Expenses

(15,494)


(18,704)


(46,231)


(54,440)

Other income, net

4,148


2,176


11,742


4,627

Financial services pretax income

12,423


17,573


51,385


49,648









Income before income taxes

139,807


185,789


361,826


646,634

Provision for income taxes

(32,502)


(41,389)


(80,328)


(164,271)

Net income

$         107,305


$         144,400


$         281,498


$         482,363









Other comprehensive income net of tax:








Unrealized gain related to available-for-sale debt securities

1


—


91


—

Other comprehensive income

1


—


91


—

Comprehensive income

$         107,306


$         144,400


$         281,589


$         482,363









Earnings per share:








Basic

$               1.44


$               2.03


$               3.82


$               6.78

Diluted

$               1.40


$               1.98


$               3.73


$               6.59









Weighted average common shares outstanding:








Basic

74,198,016


70,880,405


73,265,878


70,829,761

Diluted

76,253,178


72,729,453


75,106,356


72,892,635









Dividends declared per share

$               0.55


$               0.50


$               1.55


$               1.50

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited) 



September 30,
2023


December 31,
2022






(Dollars in thousands, except

per share amounts)

ASSETS




Homebuilding:




Cash and cash equivalents

$      1,207,532


$         696,075

Restricted cash

4,300


3,143

Marketable securities

346,351


443,712

Trade and other receivables

81,305


116,364

Inventories:




Housing completed or under construction

1,921,134


1,722,061

Land and land under development

1,315,196


1,793,718

Total inventories

3,236,330


3,515,779

Property and equipment, net

62,403


63,730

Deferred tax asset, net

46,615


49,252

Prepaids and other assets

70,791


70,007

Total homebuilding assets

5,055,627


4,958,062

Financial Services:




Cash and cash equivalents

150,457


17,877

Marketable securities

79,166


117,388

Mortgage loans held-for-sale, net

164,254


229,513

Other assets

38,499


40,432

Total financial services assets

432,376


405,210

Total Assets

$      5,488,003


$      5,363,272

LIABILITIES AND EQUITY




Homebuilding:




Accounts payable

$         135,265


$         109,218

Accrued and other liabilities

312,882


383,406

Revolving credit facility

10,000


10,000

Senior notes, net

1,483,193


1,482,576

Total homebuilding liabilities

1,941,340


1,985,200

Financial Services:




Accounts payable and accrued liabilities

108,650


110,536

Mortgage repurchase facility

145,470


175,752

Total financial services liabilities

254,120


286,288

Total Liabilities

2,195,460


2,271,488

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; 74,662,468 and 72,585,596 issued and
outstanding at September 30, 2023 and December 31, 2022, respectively

747


726

Additional paid-in-capital

1,817,494


1,784,173

Retained earnings

1,474,211


1,306,885

Accumulated other comprehensive income

91


—

Total Stockholders' Equity

3,292,543


3,091,784

Total Liabilities and Stockholders' Equity

$      5,488,003


$      5,363,272

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)



Three Months Ended
September 30,


Nine Months Ended
September 30,


2023


2022


2023


2022










(Dollars in thousands)

Operating Activities:








Net income

$     107,305


$     144,400


$     281,498


$     482,363

Adjustments to reconcile net income to net cash provided by (used in) operating activities:








Stock-based compensation expense

4,073


25,555


14,358


50,348

Depreciation and amortization

6,417


6,760


17,870


20,663

Inventory impairments

6,200


28,415


27,500


29,075

Project abandonment costs

(45)


11,809


(963)


28,758

Amortization of discount of marketable debt securities

(6,008)


(1,082)


(24,864)


(1,082)

Deferred income tax benefit (expense)

(8)


(5,387)


2,608


(4,180)

Net changes in assets and liabilities:








Trade and other receivables

(12,242)


3,011


44,979


(19,321)

Mortgage loans held-for-sale, net

(5,508)


(763)


65,259


91,696

Housing completed or under construction

(189,317)


149,218


(202,912)


(319,083)

Land and land under development

92,308


(117,282)


456,441


(19,740)

Prepaids and other assets

(4,360)


(2,275)


(3,097)


(8,050)

Accounts payable and accrued and other liabilities

(27,595)


(69,486)


(55,528)


12,506

Net cash provided by (used in) operating activities

(28,780)


172,893


623,149


343,953









Investing Activities:








Purchases of marketable securities

(422,943)


(291,126)


(1,088,433)


(291,126)

Maturities of marketable securities

680,000


—


1,249,000


—

Purchases of property and equipment

(4,330)


(7,731)


(14,880)


(21,429)

Net cash provided by (used in) investing activities

252,727


(298,857)


145,687


(312,555)









Financing Activities:








Payments on mortgage repurchase facility, net

22,319


20,649


(30,282)


(60,086)

Dividend payments

(41,063)


(35,622)


(114,172)


(106,785)

Issuance of shares under stock-based compensation programs, net

1,220


1,141


20,812


(11,545)

Net cash used in financing activities

(17,524)


(13,832)


(123,642)


(178,416)









Net increase (decrease) in cash, cash equivalents and restricted cash

206,423


(139,796)


645,194


(147,018)

Cash, cash equivalents and restricted cash:








Beginning of period

1,155,866


596,237


717,095


603,459

End of period

$  1,362,289


$     456,441


$  1,362,289


$     456,441









Reconciliation of cash, cash equivalents and restricted cash:








Homebuilding:








Cash and cash equivalents

$  1,207,532


$     417,298


$  1,207,532


$     417,298

Restricted cash

4,300


4,657


4,300


4,657

Financial Services:








Cash and cash equivalents

150,457


34,486


150,457


34,486

Total cash, cash equivalents and restricted cash

$  1,362,289


$     456,441


$  1,362,289


$     456,441

New Home Deliveries



Three Months Ended September 30,


2023


2022


% Change


Homes


Home Sale

Revenues


Average

Price


Homes


Home Sale

Revenues


Average

Price


Homes


Home

Sale

Revenues


Average
Price




















(Dollars in thousands)

West

1,198


$   651,472


$       543.8


1,312


$   772,356


$       588.7


(9) %


(16) %


(8) %

Mountain

441


284,142


644.3


647


424,397


655.9


(32) %


(33) %


(2) %

East

329


151,436


460.3


428


210,889


492.7


(23) %


(28) %


(7) %

Total

1,968


$  1,087,050


$       552.4


2,387


$  1,407,642


$       589.7


(18) %


(23) %


(6) %


Nine Months Ended September 30,


2023


2022


% Change


Homes


Home Sale

Revenues


Average

Price


Homes


Home Sale

Revenues


Average

Price


Homes


Home

Sale

Revenues


Average
Price




















(Dollars in thousands)

West

3,424


$  1,845,964


$       539.1


3,926


$  2,267,946


$       577.7


(13) %


(19) %


(7) %

Mountain

1,467


931,367


634.9


1,860


1,196,526


643.3


(21) %


(22) %


(1) %

East

937


433,205


462.3


1,370


634,513


463.1


(32) %


(32) %


— %

Total

5,828


$  3,210,536


$       550.9


7,156


$  4,098,985


$       572.8


(19) %


(22) %


(4) %

Net New Orders



Three Months Ended September 30,


2023


2022


% 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

1,022


$  590,558


$  577.8


2.38


193


$     93,481


$     484.4


0.51


430 %


532 %


19 %


371 %

Mountain

401


250,285


624.2


2.39


(3)


2,838


N/A


(0.02)


N/A


N/A


N/A


N/A

East

272


124,655


458.3


2.45


109


56,514


518.5


1.01


150 %


121 %


(12) %


143 %

Total

1,695


$  965,498


$  569.6


2.39


299


$   152,833


$     511.1


0.46


467 %


532 %


11 %


416 %

1

Gross order average selling price for the three months ended September 30, 2023 decreased approximately 4% year-over-year to $560,000.


Nine Months Ended September 30,


2023


2022


% 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

3,375


$  1,939,875


$  574.8


2.68


2,754


$ 1,677,039


$     608.9


2.66


23 %


16 %


(6) %


1 %

Mountain

1,285


781,530


608.2


2.55


1,194


811,860


679.9


2.52


8 %


(4) %


(11) %


1 %

East

969


439,187


453.2


2.91


906


457,919


505.4


2.80


7 %


(4) %


(10) %


4 %

Total

5,629


$  3,160,592


$  561.5


2.68


4,854


$ 2,946,818


$     607.1


2.64


16 %


7 %


(8) %


2 %

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,


%


2023


2022


Change


2023


2022


Change


2023


2022


Change

West

141


132


7 %


143


127


13 %


140


115


22 %

Mountain

55


51


8 %


56


52


8 %


56


53


6 %

East

39


37


5 %


37


36


3 %


37


36


3 %

Total

235


220


7 %


236


215


10 %


233


204


14 %

Backlog



September 30,


2023


2022


% Change


Homes


Dollar

Value


Average

Price


Homes


Dollar

Value


Average

Price


Homes


Dollar

Value


Average

Price




















(Dollars in thousands)

West

1,842


$  1,113,867


$       604.7


3,044


$  1,762,858


$       579.1


(39) %


(37) %


4 %

Mountain

533


355,759


667.5


1,508


1,038,037


688.4


(65) %


(66) %


(3) %

East

400


188,972


472.4


786


396,406


504.3


(49) %


(52) %


(6) %

Total

2,775


$  1,658,598


$       597.7


5,338


$  3,197,301


$       599.0


(48) %


(48) %


— %

Homes Completed or Under Construction (WIP lots)



September 30,


%


2023


2022


Change

Unsold:






Completed

236


187


26 %

Under construction

2,445


895


173 %

Total unsold started homes

2,681


1,082


148 %

Sold homes under construction or completed

2,585


5,094


(49) %

Model homes under construction or completed

552


532


4 %

Total homes completed or under construction

5,818


6,708


(13) %

Lots Owned and Optioned (including homes completed or under construction)



September 30, 2023


September 30, 2022




Lots

Owned


Lots

Optioned


Total


Lots

Owned


Lots

Optioned


Total


Total

% Change

West

10,128


1,092


11,220


13,893


914


14,807


(24) %

Mountain

4,420


1,793


6,213


6,151


2,458


8,609


(28) %

East

3,218


1,702


4,920


3,848


1,992


5,840


(16) %

Total

17,766


4,587


22,353


23,892


5,364


29,256


(24) %

Selling, General and Administrative Expenses



Three Months Ended September 30,


Nine Months Ended September 30,


2023


2022


Change


2023


2022


Change


(Dollars in thousands)

General and administrative expenses

$    46,232


$    80,858


$      (34,626)


$   141,213


$   225,735


$      (84,522)

General and administrative expenses as a percentage of
home sale revenues

4.3 %


5.7 %


-140 bps


4.4 %


5.5 %


-110 bps

Marketing expenses

$    24,875


$    26,355


$        (1,480)


$    70,608


$    78,022


$        (7,414)

Marketing expenses as a percentage of home sale
revenues

2.3 %


1.9 %


40 bps


2.2 %


1.9 %


30 bps

Commissions expenses

$    30,204


$    34,222


$        (4,018)


$    91,211


$   100,841


$        (9,630)

Commissions expenses as a percentage of home sale
revenues

2.8 %


2.4 %


40 bps


2.8 %


2.5 %


30 bps

Total selling, general and administrative expenses

$   101,311


$   141,435


$      (40,124)


$   303,032


$   404,598


$    (101,566)

Total selling, general and administrative expenses as a
percentage of home sale revenues

9.3 %


10.0 %


-70 bps


9.4 %


9.9 %


-50 bps

Capitalized Interest



Three Months Ended
September 30,


Nine Months Ended
September 30,


2023


2022


2023


2022










(Dollars in thousands)

Homebuilding interest incurred

$            17,482


$          17,391


$         52,386


$         52,031

Less: Interest capitalized

(17,482)


(17,391)


(52,386)


(52,031)

Homebuilding interest expensed

$                  —


$                —


$               —


$                —









Interest capitalized, beginning of period

$            61,953


$          62,169


$         59,921


$         58,054

Plus: Interest capitalized during period

17,482


17,391


52,386


52,031

Less: Previously capitalized interest included in home cost of sales

(14,007)


(15,977)


(46,879)


(46,502)

Interest capitalized, end of period

$            65,428


$          63,583


$         65,428


$         63,583

SOURCE M.D.C. Holdings, Inc.