Company Announcements

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 , 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 Information 1


•         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 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.

 

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

 

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 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

 

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

 

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 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

 

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SOURCE M.D.C. Holdings, Inc.