4th Quarter 2017 Webcast

Transcription

1 he Raven, AZ 4th Quarter 2017 Webcast M.D.C. Holdings, Inc. February 1, 2018

2 Forward Looking Statements Certain statements in this release, including statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, constitute "forwardlooking statements" within the meaning of the Private Securities Litigation Reform Act of 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 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 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-K for the year ended December 31, 2017, 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. The Lawson, NV The Sage, NV It should also be noted that SEC Regulation G requires that certain information accompany the use of non-gaap financial measures. Any information required by Regulation G will be posted on our web site, 2

3 Overview Q vs. Q Net income of $24.6 million, or $0.43 per diluted share vs. $40.4 million, or $0.72 per diluted share* - Net charge of $9.3 million related to various tax items, including the remeasurement of deferred tax assets (following the enactment of the Tax Cuts and Jobs Act in December 2017) Pretax income of $51.8 million vs. $59.0 million - Q includes $5.4 million of infrequent charges to G&A related to accrual adjustments or tax planning strategies Home sale revenues of $702.6 million vs. $716.6 million Gross margin from home sales percentage up 120 basis points to 17.3% Dollar value of net new orders up 23% to $574.3 million - Monthly sales absorption pace up 31% to 2.7 Ending backlog of $1.60 billion, up 16% FY 2017 vs. FY 2016 Net income of $141.8 million, or $2.48 per diluted share vs. $103.2 million, or $1.85 per diluted share* Home sale revenues of $2.50 billion vs. $2.26 billion Dollar value of net new orders up 6% year-over-year to $2.70 billion 10,382 lots approved for purchase, up 100% Backlog of $1.60 billion, up 16% year-over-year Pretax return on equity up 510 bps to 16.9% Liquidity increased 40% to $1.25 billion - $150 million add-on issuance of senior notes due 2043 ($500 million total now issued) - Homebuilding line of credit increased from $550 million to $700 million in September (maturity extended to December 2022) 2,566 lots approved for purchase, up 64% 8% stock dividend in December 2017 Quarterly cash dividend of $0.30 ($1.20 annualized) declared in January 2018, up 20% from dividend declared in October 2017 *All per share amounts have been adjusted as necessary for the 8% stock dividend declared and paid in the 2017 fourth quarter. The Yorktown, CO 3

4 Homes Closed and Average Selling Price 1,800 1,600 1,582 Homes Closed $475 Average Selling Price ($ in thousands) -2% 0% $451.6 $ ,556 $450 1,400 $425 1,200 $400 1,000 Q4 '16 Q4 '17 $375 Q4 '16 Q4 '17 3,448 46% 3,463 45% Beginning Backlog Backlog Conversion Rate (Closings as a % of Beginning Backlog) 76% 75% % of Beginning Backlog Under Construction 4

5 Gross Margin 20.0% Gross Margin % from Home Sales Gross Margin $ from Home Sales Per Home Closed (in thousands) +120 bps 17.5% 17.3% $80 +$5.2 $ % 15.0% $72.7 $ % 10.0% Q4 '16 Q4 '17 $60 Q4 '16 Q4 '17 5

6 $ in Millions Homebuilding SG&A Expenses (incl. Corporate) 1,582 1,256 1,412 1,317 1,556 Home Closings $715.8 $563.5 $647.6 $585.0 $702.6 Home Sale Revenues (in millions) 9.5% 11.8% 10.9% 11.8% 11.6% SG&A % of Home Sale Revenues $100 $81.4 The Citrine, CO $75 $67.9 $66.3 $70.7 $ $ $ $0 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 General and Administrative Marketing Commissions 6

7 Net New Home Orders Dollar Value of Net New Home Orders 3.5 Monthly Absorption Rate $465.9 (in millions) +23% $ % Q4 '16 Q4 ' Q4 '16 Q4 '17 Cancellations -- % of Gross Sales Average Subdivisions 27% 22% Cancellations -- % of Beginning Backlog 11% 10% Ending Subdivisions

8 Active Subdivisions Active Subdivisions Soon to Be Active / Inactive /31/16 3/31/17 6/30/17 9/30/17 12/31/ /31/16 3/31/17 6/30/17 9/30/17 12/31/17 Soon to Be Active Soon to Be Inactive Soon to be active = construction activities have commenced, but 5 homes not yet sold. Soon to be inactive = between 5 and 10 homes left to sell. 8

9 Lots Acquired and Land Spend 2,500 Lots Acquired $250 Land Spend $ in millions 2,000 1,500 1,133 1,313 1,582 2,004 1,898 $200 $150 $159 $65 $130 $195 $69 $217 $219 $67 $76 1, $100 $50 $94 $53 $77 $126 $150 $143 0 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 $0 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Land Acquisition Land Development *Based on last twelve months closings. 9

10 Lots Approved and Lot Supply Lots Approved for Acquisition Total Number of Lots Controlled 3,600 3,342 20,000 18,959 19,312 2,700 1,800 1,560 1,985 2,489 2,566 15,000 14,670 14,875 2,865 3,032 17,094 5,090 6,306 6, ,000 11,805 11,843 12,004 12,653 12,998 0 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 5,000 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Owned Optioned Years Supply of Lots Controlled* (including WIP) *Based on last twelve months closings. 10

11 Pretax Return on Equity Pretax Return on Equity (Last Twelve Months) 20% +510 bps 17.7% 16.9% 15% 13.4% 14.1% 11.8% 10% 5% Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 11

12 Auburn Streetscape, CA Questions?

13 Reconciliation of Non-GAAP Financial Measures Net debt and net capital 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 net debt and net capital to debt and capital as calculated based on GAAP. We believe the ratio of net debt to net capital, also knows as net debt-to-capital is meaningful to investors as management uses the ratio in understanding the leverage employed in our operations and as an indicator of our ability to obtain external financing. Furthermore, we utilize this information for comparative purposes within our industry. December 31, December 31, (Dollars in thousands) Homebuilding senior notes, net $ 986,597 $ 841,646 Revolving credit facility 15,000 15,000 Less: Homebuilding cash and cash equivalents (472,957) (259,087) Homebuilding marketable securities (49,634) (59,770) Financial services cash and cash equivalents (32,471) (23,822) Financial services marketable securities (42,004) (36,436) Net debt 404, ,531 Stockholders' equity 1,407,287 1,320,070 Total capital $ 1,811,818 1,797,601 Ratio of net debt to capital 22.3% 26.6% 13

14 Reconciliation of Non-GAAP Financial Measures 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 adjustment gross margins in a similar fashion. Three Months Ended December 31, Gross September 30, Gross June 30, Gross March 31, Gross December 31, Gross 2017 Margin % 2017 Margin % 2017 Margin % 2017 Margin % 2016 Margin % (Dollars in thousands) Gross Margin $ 121, % $ 95, % $ 108, % $ 89, % $ 115, % Less: Land Sales Revenue (1,609) (1,340) (1,351) (247) (770) Add: Land Cost of Sales 1,768 1,259 1, Gross Margin from Home Sales 121, % 95, % 108, % 89, % 114, % Add: Inventory Impairments 620 4,540-4,850 3,873 Add: Warranty Adjustments 1,716 (425) ,400 Gross Margin from Home Sales Excluding Inventory Impairments and Warranty Adjustments 123, % 99, % 108, % 94, % 121, % Add: Interest in Home Cost of Sales 17,938 15,001 17,123 15,174 19,455 Gross Margin from Home Sales Excluding Inventory Impairments, Warranty Adjustments, and Interest in Cost of Sales $ 141, % $ 114, % $ 125, % $ 109, % $ 140, % 14