M.D.C. Holdings Announces Second Quarter 2020 Results

Rhea-AI Summary

M.D.C Holdings, Inc. (NYSE: MDC) reported a strong second quarter in 2020, with net income rising 55% to $84.4 million, or $1.31 per diluted share. Home sale revenues climbed 21% to $886.8 million, driven by a 25% increase in unit deliveries to 1,900. The company experienced a 5% rise in unit net orders year-over-year and a notable 53% increase in June. Liquidity remains robust at $1.52 billion, with a positive outlook for home deliveries of 7,700 to 8,000 for the year. A quarterly dividend of $0.33 per share was also declared, marking a 10% increase from 2019.

Positive

• Net income increased by 55% to $84.4 million.
• Home sale revenues rose by 21% to $886.8 million.
• Unit deliveries surged 25% to 1,900.
• Unit net orders increased by 5% year-over-year.
• Dollar value of ending backlog grew by 23% to $2.37 billion.
• Quarterly dividend increased by 10% to $0.33 per share.

Negative

• Average selling price of deliveries decreased by 4% to $466,700.

DENVER, July 28, 2020 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended June 30, 2020.

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "MDC experienced a remarkable turnaround in the second quarter of 2020, as order activity rebounded sharply from the initial weeks of the pandemic. Unit net orders for the quarter rose 5% year-over-year and increased 53% for the month of June, with our sales efforts gaining momentum as the quarter progressed. We also generated strong revenue growth and margin expansion in the quarter, resulting in net income of $84.4 million, or $1.31 per diluted share."

Mr. Mizel continued, "Our results this quarter reflect the favorable industry dynamics in place today, including a low interest rate environment, a lack of available supply and a highly motivated buyer. They also reflect our continued shift in focus to the more affordable segments of the market and the benefits of our build-to-order strategy, which caters to the wants and needs of a large segment of the buying population. We believe that providing homebuyers with flexibility and choice at an affordable price is a winning strategy for our company. Given the favorable market conditions we are experiencing, we now believe that we may achieve as many as 8,000 home deliveries for the 2020 full year, which would be a 15% increase from the prior year."

Mr. Mizel concluded, "While there are still many uncertainties regarding the pandemic's impact on our industry and the broader economy, MDC is well positioned for the future given our seasoned leadership team, our strategic focus and our balance sheet strength. I want to thank all of our team members who have done such an excellent job adapting to this new reality and who have been vigilant in providing a safe environment for our employees, suppliers and customers."

2020 Second Quarter Highlights and Comparisons to 2019 Second Quarter
•  Home sale revenues increased 21% to $886.8 million from $732.8 million
	•  Unit deliveries up 25% to 1,900
	•  Average selling price of deliveries down 4% to $466,700
•  Homebuilding pretax income increased 38% to $84.9 million from $61.6 million
	•  Gross margin from home sales increased 70 basis points to 20.2% from 19.5%
	•  Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 90 basis points to 10.4%
•  Financial services pretax income increased 110% to $26.7 million vs. $12.7 million
	•  Loan capture rate increased 800 basis points to 69%
•  Net income of $84.4 million, or $1.31 per diluted share, up 55% from $54.6 million or $0.86 per diluted share
	•  Effective tax rate of 24.4% vs. 26.6%
•  Dollar value of net new orders increased 8% to $1.04 billion from $967.9 million
	•  Unit net orders increased 5% to 2,390
	•  Average selling price of net orders up 3%
•  Dollar value of ending backlog up 23% to $2.37 billion from $1.93 billion
	•  Unit backlog increased 20% to 5,143
	•  Average selling price of homes in backlog up 3%
June 30, 2020 Financial Position Highlights
•  Total liquidity of $1.52 billion
	•  Total cash and cash equivalents of $544.9 million
	•  $964.1 million of availability under homebuilding line of credit ($1.0 billion facility size; maturity of December 2023)
•  No senior note maturities until 2024
2020 Outlook and Other Selected Information1
•  Home deliveries for the 2020 third quarter between 1,900 and 2,100
	•  Average selling price for 2020 third quarter unit deliveries exceeding $460,000
	•  Gross margin from home sales for the 2020 third quarter of approximately 20% (excluding impairments and warranty adjustments)
•  Full year 2020 home deliveries between 7,700 and 8,000
•  Active subdivision count at June 30, 2020 of 192, up 3% year-over-year
•  Lots controlled of 25,027 at June 30, 2020, up 6% year-over-year
•  Quarterly cash dividend of thirty-three cents ($0.33) per share declared on July 27, 2020, up 10% from prior year
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 210,000 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 and Portland. 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, 2020, 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,
	2020				2019				2020				2019
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	886,758			$	732,844			$	1,583,843			$	1,380,122
Home cost of sales	(707,789)				(590,172)				(1,266,436)				(1,114,724)
Inventory impairments	—				—				—				(610)
Total cost of sales	(707,789)				(590,172)				(1,266,436)				(1,115,334)
Gross profit	178,969				142,672				317,407				264,788
Selling, general and administrative expenses	(92,316)				(82,712)				(181,637)				(164,973)
Interest and other income	720				2,764				2,609				5,155
Other expense	(2,452)				(1,110)				(3,789)				(2,301)
Homebuilding pretax income	84,921				61,614				134,590				102,669
Financial Services:
Revenues	32,964				18,597				54,850				36,001
Expenses	(12,178)				(9,574)				(23,107)				(18,531)
Other income (expense), net	5,931				3,694				(6,133)				9,798
Financial services pretax income	26,717				12,717				25,610				27,268
Income before income taxes	111,638				74,331				160,200				129,937
Provision for income taxes	(27,242)				(19,738)				(39,044)				(34,794)
Net income	$	84,396			$	54,593			$	121,156			$	95,143
Comprehensive income	$	84,396			$	54,593			$	121,156			$	95,143
Earnings per share:
Basic	$	1.33			$	0.88			$	1.92			$	1.55
Diluted	$	1.31			$	0.86			$	1.87			$	1.50
Weighted average common shares outstanding:
Basic	63,015,827				61,336,404				62,755,310				61,138,982
Diluted	64,080,940				63,323,267				64,538,835				63,023,149
Dividends declared per share	$	0.33			$	0.30			$	0.66			$	0.60

 

M.D.C. HOLDINGS, INC. Consolidated Balance Sheets (Unaudited)
	June 30, 2020				December 31, 2019
	(Dollars in thousands, except per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents	$	482,702			$	424,186
Restricted cash	15,668				14,279
Trade and other receivables	88,279				65,829
Inventories:
Housing completed or under construction	1,270,300				1,036,191
Land and land under development	1,235,598				1,330,384
Total inventories	2,505,898				2,366,575
Property and equipment, net	62,516				60,414
Deferred tax asset, net	19,828				21,768
Prepaid and other assets	69,484				78,358
Total homebuilding assets	3,244,375				3,031,409
Financial Services:
Cash and cash equivalents	62,218				35,747
Marketable securities	—				56,747
Mortgage loans held-for-sale, net	173,567				197,021
Other assets	25,775				17,432
Total financial services assets	261,560				306,947
Total Assets	$	3,505,935			$	3,338,356
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	95,018			$	87,364
Accrued and other liabilities	278,543				245,940
Revolving credit facility	10,000				15,000
Senior notes, net	1,037,062				989,422
Total homebuilding liabilities	1,420,623				1,337,726
Financial Services:
Accounts payable and accrued liabilities	70,033				68,529
Mortgage repurchase facility	142,094				149,616
Total financial services liabilities	212,127				218,145
Total Liabilities	1,632,750				1,555,871
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; 63,384,866 and 62,574,961 issued and outstanding at June 30, 2020 and December 31, 2019, respectively	634				626
Additional paid-in-capital	1,359,985				1,348,733
Retained earnings	512,566				433,126
Total Stockholders' Equity	1,873,185				1,782,485
Total Liabilities and Stockholders' Equity	$	3,505,935			$	3,338,356

 

M.D.C. HOLDINGS, INC. Consolidated Statement of Cash Flows (Unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
	(Dollars in thousands)
Operating Activities:
Net income	$	84,396			$	54,593			$	121,156			$	95,143
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	5,488				4,132				9,928				8,383
Depreciation and amortization	6,375				5,063				11,527				9,941
Inventory impairments	—				—				—				610
Net (gain) loss on marketable equity securities	(4,983)				(2,327)				8,285				(7,167)
Deferred income tax expense	831				5,063				1,962				7,759
Net changes in assets and liabilities:					-
Trade and other receivables	(21,834)				13,735				(23,445)				(36)
Mortgage loans held-for-sale, net	(39,646)				1,473				23,454				39,874
Housing completed or under construction	(54,956)				(120,665)				(233,829)				(118,528)
Land and land under development	65,867				42,934				94,918				24,438
Prepaid and other assets	9,669				(5,291)				1,209				(4,206)
Accounts payable and accrued liabilities	41,670				2,607				40,539				(546)
Net cash provided by operating activities	92,877				1,317				55,704				55,665
Investing Activities:
Purchases of marketable securities	(1,022)				(331)				(10,804)				(5,116)
Sales of marketable securities	49,990				320				59,266				5,057
Purchases of property and equipment	(6,456)				(7,474)				(12,968)				(13,860)
Net cash provided by (used in) investing activities	42,512				(7,485)				35,494				(13,919)
Financing Activities:
Payments on mortgage repurchase facility, net	33,350				(1,817)				(7,522)				(33,776)
Payments on homebuilding line of credit, net	(5,000)				—				(5,000)				—
Repayment of senior notes	—				—				(250,000)				—
Proceeds from issuance of senior notes	—				—				298,050				—
Dividend payments	(20,914)				(18,521)				(41,682)				(35,636)
Issuance of shares under stock-based compensation programs, net	(6,862)				10,241				1,332				17,328
Net cash provided by (used in) financing activities	574				(10,097)				(4,822)				(52,084)
Net increase (decrease) in cash, cash equivalents and restricted cash	135,963				(16,265)				86,376				(10,338)
Cash, cash equivalents and restricted cash:
Beginning of period	424,625				476,066				474,212				470,139
End of period	$	560,588			$	459,801			$	560,588			$	459,801
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents	$	482,702			$	390,061			$	482,702			$	390,061
Restricted cash	15,668				12,911				15,668				12,911
Financial Services:					-
Cash and cash equivalents	62,218				56,829				62,218				56,829
Total cash, cash equivalents and restricted cash	$	560,588			$	459,801			$	560,588			$	459,801

 

New Home Deliveries
	Three Months Ended June 30,
	2020											2019											% Change
	Homes			Home Sale Revenues				Average Price				Homes			Home Sale Revenues				Average Price				Homes			Home Sale Revenues			Average Price
	(Dollars in thousands)
West	1,017			$	490,117			$	481.9			785			$	384,530			$	489.8			30	%		27	%		(2)	%
Mountain	608			316,666				520.8				534			287,476				538.3				14	%		10	%		(3)	%
East	275			79,975				290.8				195			60,838				312.0				41	%		31	%		(7)	%
Total	1,900			$	886,758			$	466.7			1,514			$	732,844			$	484.0			25	%		21	%		(4)	%
	Six Months Ended June 30,
	2020											2019											% Change
	Homes			Home Sale Revenues				Average Price				Homes			Home Sale Revenues				Average Price				Homes			Home Sale Revenues			Average Price
	(Dollars in thousands)
West	1,888			$	895,615			$	474.4			1,537			$	754,088			$	490.6			23	%		19	%		(3)	%
Mountain	1,043			539,524				517.3				943			496,668				526.7				11	%		9	%		(2)	%
East	516			148,704				288.2				392			129,366				330.0				32	%		15	%		(13)	%
Total	3,447			$	1,583,843			$	459.5			2,872			$	1,380,122			$	480.5			20	%		15	%		(4)	%

 

Net New Orders
	Three Months Ended June 30,
	2020													2019													% 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	1,309			$	574,996			$	439.3			4.62		1,246			$	550,742			$	442.0			4.46		5	%		4	%		(1)	%		4	%
Mountain	758			362,228				477.9				3.99		690			318,275				461.3				3.56		10	%		14	%		4	%		12	%
East	323			106,436				329.5				3.53		337			98,843				293.3				4.36		(4)	%		8	%		12	%		(19)	%
Total	2,390			$	1,043,660			$	436.7			4.23		2,273			$	967,860			$	425.8			4.13		5	%		8	%		3	%		2	%
	Six Months Ended June 30,
	2020													2019													% 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	2,691			$	1,262,330			$	469.1			4.88		2,211			$	1,003,236			$	453.7			4.15		22	%		26	%		3	%		18	%
Mountain	1,451			722,197				497.7				3.76		1,409			669,523				475.2				3.53		3	%		8	%		5	%		7	%
East	647			206,911				319.8				3.58		609			182,141				299.1				4.33		6	%		14	%		7	%		(17)	%
Total	4,789			$	2,191,438			$	457.6			4.28		4,229			$	1,854,900			$	438.6			3.94		13	%		18	%		4	%		9	%
*Calculated as total net new orders 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,						%
	2020			2019			Change			2020			2019			Change			2020			2019			Change
West	96			97			(1)	%		95			94			1	%		92			89			3	%
Mountain	63			65			(3)	%		63			65			(3)	%		64			66			(3)	%
East	33			25			32	%		31			26			19	%		30			23			30	%
Total	192			187			3	%		189			185			2	%		186			178			4	%

 

Backlog
	June 30,
	2020											2019											% Change
	Homes			Dollar Value				Average Price				Homes			Dollar Value				Average Price				Homes			Dollar Value			Average Price
	(Dollars in thousands)
West	2,826			$	1,336,251			$	472.8			2,197			$	1,016,327			$	462.6			29	%		31	%		2	%
Mountain	1,619			$	816,559			$	504.4			1,509			$	739,921			$	490.3			7	%		10	%		3	%
East	698			$	220,362			$	315.7			587			$	173,436			$	295.5			19	%		27	%		7	%
Total	5,143			$	2,373,172			$	461.4			4,293			$	1,929,684			$	449.5			20	%		23	%		3	%

 

Homes Completed or Under Construction (WIP lots)
	June 30,						%
	2020			2019			Change
Unsold:
Completed	109			96			14	%
Under construction	191			236			(19)	%
Total unsold started homes	300			332			(10)	%
Sold homes under construction or completed	3,573			3,023			18	%
Model homes under construction or completed	502			457			10	%
Total homes completed or under construction	4,375			3,812			15	%

 

Lots Owned and Optioned (including homes completed or under construction)
	June 30, 2020									June 30, 2019
	Lots Owned			Lots Optioned			Total			Lots Owned			Lots Optioned			Total			Total % Change
West	9,364			2,619			11,983			8,611			2,446			11,057			8	%
Mountain	6,076			2,667			8,743			6,457			2,741			9,198			(5)	%
East	2,260			2,041			4,301			2,085			1,267			3,352			28	%
Total	17,700			7,327			25,027			17,153			6,454			23,607			6	%

 

Selling, General and Administrative Expenses
	Three Months Ended June 30,												Six Months Ended June 30,
	2020				2019				Change				2020				2019				Change
	(Dollars in thousands)
General and administrative expenses	$	40,419			$	39,326			$	1,093			$	85,508			$	81,898			$	3,610
General and administrative expenses as a percentage of home sale revenues	4.6		%		5.4		%		-80 bps				5.4		%		5.9		%		-50 bps
Marketing expenses	$	22,657			$	19,513			$	3,144			$	44,103			$	37,809			$	6,294
Marketing expenses as a percentage of home sale revenues	2.6		%		2.7		%		-10 bps				2.8		%		2.7		%		10 bps
Commissions expenses	$	29,240			$	23,873			$	5,367			$	52,026			$	45,266			$	6,760
Commissions expenses as a percentage of home sale revenues	3.3		%		3.3		%		0 bps				3.3		%		3.3		%		0 bps
Total selling, general and administrative expenses	$	92,316			$	82,712			$	9,604			$	181,637			$	164,973			$	16,664
Total selling, general and administrative expenses as a percentage of home sale revenues	10.4		%		11.3		%		-90 bps				11.5		%		12.0		%		-50 bps

 

Capitalized Interest
	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
	(Dollars in thousands)
Homebuilding interest incurred	$	15,094			$	15,980			$	31,628			$	32,011
Less: Interest capitalized	(15,094)				(15,980)				(31,628)				(32,011)
Homebuilding interest expensed	$	—			$	—			$	—			$	—
Interest capitalized, beginning of period	$	59,077			$	56,947			$	55,310			$	54,845
Plus: Interest capitalized during period	15,094				15,980				31,628				32,011
Less: Previously capitalized interest included in home cost of sales	(17,242)				(14,734)				(30,009)				(28,663)
Interest capitalized, end of period	$	56,929			$	58,193			$	56,929			$	58,193

 

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SOURCE M.D.C. Holdings, Inc.

FAQ

What were M.D.C Holdings' net income results for Q2 2020?

M.D.C Holdings reported a net income of $84.4 million for Q2 2020, a 55% increase from the previous year.

How much did home sale revenues increase for M.D.C Holdings in Q2 2020?

Home sale revenues increased by 21% to $886.8 million in Q2 2020 compared to Q2 2019.

What was the percentage increase in unit deliveries for M.D.C Holdings in Q2 2020?

Unit deliveries rose by 25% to 1,900 in Q2 2020.

What is the outlook for home deliveries for M.D.C Holdings in 2020?

M.D.C Holdings expects home deliveries to range between 7,700 and 8,000 for the full year 2020.

Did M.D.C Holdings declare a dividend in July 2020?

Yes, M.D.C Holdings declared a quarterly dividend of $0.33 per share on July 27, 2020, a 10% increase from the previous year.