PHM PulteGroup Inc

• Net Income of $1.54 Per Share
• Adjusted Net Income Increased 33% to $1.34 Per Share
• Net New Orders Increased 36% to 8,202 Homes; Net New Order Value Increased 43% to $3.6 Billion
• Closings Increased 4% to 6,454 Homes
• Home Sale Revenues Increased 7% to $2.8 Billion
• Reported Homebuilding Gross Margin Increased 140 Basis Points to 24.5%
• SG&A Improved 70 Basis Points to 9.6% of Home Sale Revenues
• Unit Backlog Increased 29% to 14,962 Homes; Backlog Value Increased 32% to $6.6 Billion

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2020. For the quarter, the Company reported net income of $416 million, or $1.54 per share. Adjusted net income for the period was $363 million, or $1.34 per share, which excludes a tax benefit of $53 million resulting from energy tax credits recorded in the period. In the prior year, the Company reported net income of $273 million, or $0.99 per share, and adjusted net income of $280 million, or $1.01 per share, after excluding a $9 million pre-tax warranty charge taken in the quarter.

“The dramatic rebound in housing demand that began in May continued through the third quarter, as we generated exceptionally strong sales across all buyer groups and realized a 36% increase in net new orders over last year,” said Ryan Marshall, PulteGroup President and CEO. “Our teams continue to successfully execute against our key business objectives which helped us to deliver outstanding financial results, including a 210 basis point increase in operating margin and a 33% increase in adjusted earnings per share.

“While COVID-19 still weighs on much of the U.S. economy, housing demand continued to benefit from low interest rates, supportive demographics, limited housing supply and a desire for new homes with features that can meet the evolving needs of today’s homebuyers. With our customer-centric design process, build-to-order operating model and ability to serve buyers at all price points, we are well positioned to meet this demand within the markets we serve.”

Third Quarter Results

Home sale revenues for the third quarter increased 7% over the prior year to $2.8 billion. Higher revenues for the period were driven by a 4% increase in closings to 6,454 homes, combined with a 3% increase in the average price of homes closed to $438,000.

The Company’s reported home sale gross margin for the third quarter was 24.5%. This represents an increase of 140 basis points over the prior year reported gross margin of 23.1%. In the third quarter, the Company’s homebuilding SG&A expense was $271 million, or 9.6% of home sale revenues. Prior year third quarter SG&A expense was $271 million, or 10.3% of home sale revenues.

Net new orders for the third quarter increased 36% over the prior year to 8,202 homes, while the value of net new orders increased 43% to $3.6 billion. Higher orders in the quarter were driven by continued strong demand among first-time buyers, along with significant gains in the Company’s move-up and active-adult businesses. In the third quarter, the Company operated out of an average of 892 communities which is an increase of 3% over prior year average community count of 865.

Unit backlog at the end of the quarter totaled 14,962 homes, which is an increase of 29% over the comparable prior year period. Backlog value at the end of the third quarter was $6.6 billion, which is up 32% over prior year and is the Company’s highest third quarter value in over a decade.

For the third quarter, the Company's financial services operations reported a 98% increase in pre-tax income to $64 million. Higher pre-tax income resulted from an increase in mortgage origination volumes resulting from growth in the Company’s homebuilding operations, higher capture rates, and improved margins within our mortgage operations. The Company continued to realize an improved mortgage capture rate which increased to 86% in the third quarter, up from 84% last year.

The Company’s pre-tax income for the quarter increased to $484 million. Income tax expense for the quarter was $68 million, or an effective tax rate of 14.0%, inclusive of the tax benefit of $53 million resulting from energy tax credits recognized in the period.

PulteGroup ended the third quarter with $2.1 billion of cash and a debt-to-total capital ratio of 30.8%, which is down from 33.6% at the end of 2019.

A conference call discussing PulteGroup's third quarter 2020 results is scheduled for Thursday, October 22, 2020, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.

Forward-Looking Statements

This release includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “project,” “may,” “can,” “could,” “might,” "should", “will” and similar expressions identify forward-looking statements, including statements related to any potential impairment charges and the impacts or effects thereof, expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: interest rate changes and the availability of mortgage financing; competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our homebuilding operations; the impact of any changes to our strategy in responding to the cyclical nature of the industry, including any changes regarding our land positions and the levels of our land spend; the availability and cost of insurance covering risks associated with our businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws which could have a greater impact on our effective tax rate or the value of our deferred tax assets than we anticipate; economic changes nationally or in our local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; our ability to generate sufficient cash flow in order to successfully implement our capital allocation priorities; required accounting changes; terrorist acts and other acts of war; the negative impact of the COVID-19 pandemic on our financial position and ability to continue our Homebuilding or Financial Services activities at normal levels or at all in impacted areas; the duration, effect and severity of the COVID-19 pandemic; the measures that governmental authorities take to address the COVID-19 pandemic which may precipitate or exacerbate one or more of the above-mentioned and/or other risks and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period of time; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. See PulteGroup's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and other public filings with the Securities and Exchange Commission (the "SEC") for a further discussion of these and other risks and uncertainties applicable to our businesses. PulteGroup undertakes no duty to update any forward-looking statement, whether as a result of new information, future events or changes in PulteGroup's expectations.

About PulteGroup

PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one of America’s largest homebuilding companies with operations in 40 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and Neighborhoods, the company is one of the industry’s most versatile homebuilders able to meet the needs of multiple buyer groups and respond to changing consumer demand. PulteGroup’s purpose is building incredible places where people can live their dreams.

For more information about PulteGroup, Inc. and PulteGroup’s brands, go to pultegroup.com; www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com; www.jwhomes.com; and www.americanwesthomes.com. Follow PulteGroup, Inc. on Twitter: @PulteGroupNews.

 

PulteGroup, Inc.

Consolidated Statements of Operations

($000's omitted, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

Homebuilding

 

 

 

 

 

 

 

Home sale revenues

$

2,823,921

 

 

$

2,637,002

 

 

$

7,517,453

 

 

$

6,990,417

 

Land sale and other revenues

24,165

 

 

8,548

 

 

70,042

 

 

40,993

 

 

2,848,086

 

 

2,645,550

 

 

7,587,495

 

 

7,031,410

 

Financial Services

106,871

 

 

64,815

 

 

256,223

 

 

164,634

 

Total revenues

2,954,957

 

 

2,710,365

 

 

7,843,718

 

 

7,196,044

 

 

 

 

 

 

 

 

 

Homebuilding Cost of Revenues:

 

 

 

 

 

 

 

Home sale cost of revenues

(2,131,741

)

 

(2,028,622

)

 

(5,706,814

)

 

(5,369,568

)

Land sale and other cost of revenues

(20,502

)

 

(7,350

)

 

(55,558

)

 

(35,615

)

 

(2,152,243

)

 

(2,035,972

)

 

(5,762,372

)

 

(5,405,183

)

 

 

 

 

 

 

 

 

Financial Services expenses

(42,807

)

 

(32,514

)

 

(112,135

)

 

(94,864

)

Selling, general, and administrative expenses

(271,257

)

 

(270,625

)

 

(731,785

)

 

(782,791

)

Goodwill impairment

—

 

 

—

 

 

(20,190

)

 

—

 

Other expense, net

(4,483

)

 

(5,108

)

 

(12,292

)

 

(9,581

)

Income before income taxes

484,167

 

 

366,146

 

 

1,204,944

 

 

903,625

 

Income tax expense

(67,769

)

 

(93,042

)

 

(236,216

)

 

(222,723

)

Net income

$

416,398

 

 

$

273,104

 

 

$

968,728

 

 

$

680,902

 

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

 

Basic earnings

$

1.54

 

 

$

0.99

 

 

$

3.57

 

 

$

2.44

 

Diluted earnings

$

1.54

 

 

$

0.99

 

 

$

3.56

 

 

$

2.44

 

Cash dividends declared

$

0.12

 

 

$

0.11

 

 

$

0.36

 

 

$

0.33

 

 

 

 

 

 

 

 

 

Number of shares used in calculation:

 

 

 

 

 

 

 

Basic

268,363

 

 

272,992

 

 

268,892

 

 

275,734

 

Effect of dilutive securities

598

 

 

640

 

 

839

 

 

858

 

Diluted

268,961

 

 

273,632

 

 

269,731

 

 

276,592

 

 

PulteGroup, Inc.

Condensed Consolidated Balance Sheets

($000's omitted)

(Unaudited)

 

September 30, 2020

 

December 31, 2019

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and equivalents

$

2,067,276

 

 

$

1,217,913

 

Restricted cash

46,932

 

 

33,543

 

Total cash, cash equivalents, and restricted cash

2,114,208

 

 

1,251,456

 

House and land inventory

7,615,471

 

 

7,680,614

 

Land held for sale

26,867

 

 

24,009

 

Residential mortgage loans available-for-sale

400,067

 

 

508,967

 

Investments in unconsolidated entities

41,722

 

 

59,766

 

Other assets

917,388

 

 

895,686

 

Intangible assets

168,466

 

 

124,992

 

Deferred tax assets, net

80,833

 

 

170,107

 

 

$

11,365,022

 

 

$

10,715,597

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

Accounts payable

$

342,277

 

 

$

435,916

 

Customer deposits

403,646

 

 

294,427

 

Accrued and other liabilities

1,335,299

 

 

1,399,368

 

Income tax liabilities

15,769

 

 

36,093

 

Financial Services debt

249,046

 

 

326,573

 

Notes payable

2,778,970

 

 

2,765,040

 

 

5,125,007

 

 

5,257,417

 

Shareholders' equity

6,240,015

 

 

5,458,180

 

 

$

11,365,022

 

 

$

10,715,597

 

 

PulteGroup, Inc.

Consolidated Statements of Cash Flows

($000's omitted)

(Unaudited)

 

Nine Months Ended

 

September 30,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income

$

968,728

 

 

$

680,902

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

Deferred income tax expense

89,492

 

 

83,752

 

Land-related charges

13,930

 

 

17,549

 

Goodwill impairment

20,190

 

 

—

 

Depreciation and amortization

48,536

 

 

40,302

 

Share-based compensation expense

25,010

 

 

21,389

 

Other, net

(1,136

)

 

2,567

 

Increase (decrease) in cash due to:

 

 

 

Inventories

84,253

 

 

(427,183

)

Residential mortgage loans available-for-sale

108,178

 

 

76,813

 

Other assets

(15,627

)

 

4,146

 

Accounts payable, accrued and other liabilities

(72,929

)

 

82,543

 

Net cash provided by (used in) operating activities

1,268,625

 

 

582,780

 

Cash flows from investing activities:

 

 

 

Capital expenditures

(46,925

)

 

(43,162

)

Investments in unconsolidated entities

(663

)

 

(8,515

)

Distributions from unconsolidated entities

19,939

 

 

214

 

Business acquisition

(83,251

)

 

(163,724

)

Other investing activities, net

1,721

 

 

4,795

 

Net cash provided by (used in) investing activities

(109,179

)

 

(210,392

)

Cash flows from financing activities:

 

 

 

Repayments of notes payable

(10,993

)

 

(297,411

)

Borrowings under revolving credit facility

700,000

 

 

—

 

Repayments under revolving credit facility

(700,000

)

 

—

 

Financial Services borrowings (repayments), net

(77,527

)

 

(99,052

)

Stock option exercises

111

 

 

6,368

 

Share repurchases

(95,676

)

 

(244,388

)

Cash paid for shares withheld for taxes

(14,853

)

 

(10,726

)

Dividends paid

(97,756

)

 

(92,235

)

Net cash provided by (used in) financing activities

(296,694

)

 

(737,444

)

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

862,752

 

 

(365,056

)

Cash, cash equivalents, and restricted cash at beginning of period

1,251,456

 

 

1,133,700

 

Cash, cash equivalents, and restricted cash at end of period

$

2,114,208

 

 

$

768,644

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

Interest paid (capitalized), net

$

16,297

 

 

$

19,569

 

Income taxes paid (refunded), net

$

195,494

 

 

$

60,329

 

 

PulteGroup, Inc.

Segment Data

($000's omitted)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

HOMEBUILDING:

 

 

 

 

 

 

 

Home sale revenues

$

2,823,921

 

 

$

2,637,002

 

 

$

7,517,453

 

 

$

6,990,417

 

Land sale and other revenues

24,165

 

 

8,548

 

 

70,042

 

 

40,993

 

Total Homebuilding revenues

2,848,086

 

 

2,645,550

 

 

7,587,495

 

 

7,031,410

 

 

 

 

 

 

 

 

 

Home sale cost of revenues

(2,131,741

)

 

(2,028,622

)

 

(5,706,814

)

 

(5,369,568

)

Land sale and other cost of revenues

(20,502

)

 

(7,350

)

 

(55,558

)

 

(35,615

)

Selling, general, and administrative expenses ("SG&A")

(271,257

)

 

(270,625

)

 

(731,785

)

 

(782,791

)

Goodwill impairment

—

 

 

—

 

 

(20,190

)

 

—

 

Other expense, net

(4,483

)

 

(5,091

)

 

(12,242

)

 

(9,582

)

Income before income taxes

$

420,103

 

 

$

333,862

 

 

$

1,060,906

 

 

$

833,854

 

 

 

 

 

 

 

 

 

FINANCIAL SERVICES:

 

 

 

 

 

 

 

Income before income taxes

$

64,064

 

 

$

32,284

 

 

$

144,038

 

 

$

69,771

 

 

 

 

 

 

 

 

 

CONSOLIDATED:

 

 

 

 

 

 

 

Income before income taxes

$

484,167

 

 

$

366,146

 

 

$

1,204,944

 

 

$

903,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING METRICS:

 

 

 

 

 

 

 

Gross margin % (a)(b)

24.5

%

 

23.1

%

 

24.1

%

 

23.2

%

SG&A % (a)

(9.6

)%

 

(10.3

)%

 

(9.7

)%

 

(11.2

)%

Operating margin % (a)

14.9

%

 

12.8

%

 

14.4

%

 

12.0

%

 

(a) As a percentage of home sale revenues

(b) Gross margin represents home sale revenues minus home sale cost of revenues

 

PulteGroup, Inc.

Segment Data, continued

($000's omitted)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

Home sale revenues

$

2,823,921

 

 

$

2,637,002

 

 

$

7,517,453

 

 

$

6,990,417

 

 

 

 

 

 

 

 

 

Closings - units

 

 

 

 

 

 

 

Northeast

428

 

 

388

 

 

998

 

 

956

 

Southeast

1,057

 

 

1,067

 

 

3,089

 

 

2,915

 

Florida

1,427

 

 

1,326

 

 

4,017

 

 

3,586

 

Midwest

950

 

 

944

 

 

2,466

 

 

2,492

 

Texas

1,162

 

 

1,194

 

 

3,484

 

 

3,162

 

West

1,430

 

 

1,267

 

 

3,710

 

 

3,299

 

 

6,454

 

 

6,186

 

 

17,764

 

 

16,410

 

Average selling price

$

438

 

 

$

426

 

 

$

423

 

 

$

426

 

 

 

 

 

 

 

 

 

Net new orders - units

 

 

 

 

 

 

 

Northeast

591

 

 

424

 

 

1,422

 

 

1,240

 

Southeast

1,255

 

 

994

 

 

3,491

 

 

3,281

 

Florida

1,868

 

 

1,340

 

 

5,041

 

 

4,146

 

Midwest

1,243

 

 

895

 

 

3,158

 

 

2,894

 

Texas

1,673

 

 

1,103

 

 

4,613

 

 

3,792

 

West

1,572

 

 

1,275

 

 

4,494

 

 

3,933

 

 

8,202

 

 

6,031

 

 

22,219

 

 

19,286

 

Net new orders - dollars

$

3,634,158

 

 

$

2,538,708

 

 

$

9,579,982

 

 

$

8,165,268

 

 

 

 

 

 

 

 

 

Unit backlog

 

 

 

 

 

 

 

Northeast

 

 

 

 

1,013

 

 

754

 

Southeast

 

 

 

 

2,267

 

 

1,976

 

Florida

 

 

 

 

3,330

 

 

2,449

 

Midwest

 

 

 

 

2,232

 

 

1,804

 

Texas

 

 

 

 

2,979

 

 

2,122

 

West

 

 

 

 

3,141

 

 

2,533

 

 

 

 

 

 

14,962

 

 

11,638

 

Dollars in backlog

 

 

 

 

$

6,598,334

 

 

$

5,010,999

 

 

PulteGroup, Inc.

Segment Data, continued

($000's omitted)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

MORTGAGE ORIGINATIONS:

 

 

 

 

 

 

 

Origination volume

4,858

 

 

4,301

 

 

13,202

 

 

11,019

 

Origination principal

$

1,625,250

 

 

$

1,365,940

 

 

$

4,274,619

 

 

$

3,442,557

 

Capture rate

86.0

%

 

83.7

%

 

86.5

%

 

81.6

%

 

Supplemental Data

($000's omitted)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

Interest in inventory, beginning of period

$

207,942

 

 

$

234,709

 

 

$

210,383

 

 

$

227,495

 

Interest capitalized

40,044

 

 

39,893

 

 

119,643

 

 

123,924

 

Interest expensed

(46,841

)

 

(46,040

)

 

(128,881

)

 

(122,857

)

Interest in inventory, end of period

$

201,145

 

 

$

228,562

 

 

$

201,145

 

 

$

228,562

 

 

PulteGroup, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited)

This report contains information about our operating results reflecting certain adjustments, including: net income and diluted earnings per share ("EPS"). These measures are considered non-GAAP financial measures under the SEC's rules and should be considered in addition to, rather than as a substitute for, the comparable GAAP financial measures as measures of our profitability. We believe that reflecting these adjustments provides investors relevant and useful information for evaluating the comparability of financial information presented and comparing our profitability to other companies in the homebuilding industry. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate these measures and any adjustments thereto before comparing our measures to those of such other companies.

The following tables set forth a reconciliation of the non-GAAP financial measures to the GAAP financial measures that management believes to be most directly comparable ($000's omitted):

 

 

 

 

Three Months Ended

 

Results of Operations Classification

 

September 30,

 

 

2020

 

2019

 

 

 

 

 

 

Net income, as reported

 

 

$

416,398

 

 

$

273,104

 

Adjustments to income before income taxes:

 

 

 

 

 

Warranty claim

Home sale cost of revenues

 

—

 

 

8,956

 

Income tax effect of the above item

Income tax expense

 

—

 

 

(2,229

)

Energy tax credits

Income tax expense

 

(53,210

)

 

—

 

Adjusted net income

 

 

$

363,188

 

 

$

279,831

 

 

 

 

 

 

 

EPS (diluted), as reported

 

 

$

1.54

 

 

$

0.99

 

Adjusted EPS (diluted)

 

 

$

1.34

 

 

$

1.01

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20201022005138/en/

Investors: Jim Zeumer (404) 978-6434 jim.zeumer@pultegroup.com