PHM - PulteGroup Reports Second Quarter 2022 Financial Results

July, 26 2022 06:30 AM PulteGroup Inc.

Net Income of $2.73 Per Share Increased 59% Over Prior Year Adjusted Net Income of $1.72 Per Share
Closings of 7,177 Homes Comparable with Prior Year; Average Sales Price Increased 19% to $531,000
Home Sale Revenues Increased 18% to $3.8 Billion
Home Sale Gross Margin Increased 430 Basis Points to 30.9%
Net New Orders of 6,418 Homes with a Value of $3.9 Billion
Unit Backlog of 19,176 Homes with a Value of $11.6 Billion
Company Repurchased $294 Million of Stock in the Period

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its second quarter ended June 30, 2022. For the quarter, the Company reported net income of $652 million, or $2.73 per share. Prior year reported net income was $503 million, or $1.90 per share. Adjusted net income for the prior year period was $456 million, or $1.72 per share, after excluding a $46 million pre-tax insurance benefit and a tax benefit of $12 million resulting from a change in valuation allowances associated with state net operating loss carryforwards.

“Reflecting the exceptional demand conditions in the back half of 2021, we delivered record second quarter homebuilding revenues and gross margin which drove a significant increase in earnings per share,” said Ryan Marshall, President and Chief Executive Officer of PulteGroup. “The ongoing strength of our quarterly financial results allowed us to deliver a return on equity of 31%* for the trailing 12 months.

“While PulteGroup continues to deliver outstanding financial results and maintain a large backlog of sold homes, Federal Reserve actions to raise interest rates to combat inflation, combined with lower consumer confidence and increasing fears of a recession have worked to cool the demand environment. The recent 200-basis point increase in mortgage rates has impacted affordability, but we continue to believe the desire for homeownership is high and the long-term outlook for housing remains positive.

“Within today’s volatile market conditions, we remain disciplined in our business practices and focused on delivering high returns on invested capital in support of building long-term shareholder value. Given PulteGroup’s efficient building practices and exceptional financial strength, I believe we are extremely well positioned to manage through today’s changing market conditions.”

Home sale revenues for the second quarter increased 18% over the prior year period to $3.8 billion. Higher revenues for the quarter reflect a 19% increase in average sales price to $531,000, partially offset by a less than 1% decrease in closings to 7,177 homes. The higher average sales price for the period benefited from price increases realized in prior quarters across all buyer groups and geographies.

The Company’s second quarter homebuilding gross margin of 30.9% represents an increase of 430 basis points over the prior year second quarter and an increase of 190 basis points from the first quarter of 2022. SG&A expense for the period was $351 million, or 9.2% of home sale revenues. In the comparable prior year period, the Company’s reported SG&A expense was $272 million, or 8.4% of home sale revenues. Excluding the $46 million pre-tax insurance benefit recorded in that period, the Company’s adjusted SG&A expense was $319 million, or 9.8% of home sale revenues.

Net new orders in the second quarter were lower by 23% from last year to 6,418 homes, as higher mortgage rates, reduced affordability, and lower consumer confidence, slowed demand and resulted in an increased number of previous buyers cancelling their contracts. In the second quarter, the Company’s cancellation rate was 15%, compared with 7% in the prior year period. The dollar value of net new orders was $3.9 billion, which is a decrease of 8% from the comparable prior year period. For the second quarter, the Company operated out of an average of 791 communities.

The Company’s unit backlog at quarter end was 19,176 homes, which is a decrease of 4% from the prior year. The dollar value of homes in backlog was $11.6 billion, which is an increase of 18% over last year.

Pre-tax income for the Company's financial services operations was $40 million, down from $51 million last year. Lower pre-tax income for the quarter reflects the more competitive operating environment which continues to impact capture rate and pricing. Mortgage capture rate for the second quarter was 78%, down from 86% last year.

The Company’s reported income tax expense for the second quarter was $212 million, representing an effective tax rate of 24.5%. In the prior year period, the Company’s reported income tax expense of $136 million, or an effective tax rate of 21.3%, included the $12 million tax benefit realized in the period. The Company’s prior year tax rate also benefitted from federal energy efficient home credits which expired as of December 31, 2021.

The Company ended the second quarter with $732 million of cash and a debt-to-capital ratio of 20.8%. In the second quarter, the Company repurchased 7.1 million of its shares for $294 million, or an average price of $41.44 per share.

“We continue to allocate capital to support our homebuilding operations, while consistently returning funds to our shareholders through dividends and share repurchase,” said Bob O’Shaughnessy, EVP and Chief Financial Officer. “Through the first half of 2022, the Company paid out $74 million in dividends and returned $794 million to shareholders through the repurchase of 17.4 million shares, or 7.0% of its shares outstanding.”

A conference call discussing PulteGroup's second quarter 2022 results is scheduled for Tuesday, July 26, 2022, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroup.com .

* The Company's return on equity is calculated as net income for the trailing twelve months divided by average shareholders' equity, where average shareholders' equity is the sum of ending shareholders' equity balances of the trailing five quarters divided by five.

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; including as it relates to our ability to take pricing actions to offset rising expenses; 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, 2021, 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 more than 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 brands, go to pultegroup.com; pulte.com ; centex.com ; delwebb.com ; divosta.com ; jwhomes.com ; and 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

Six Months Ended


June 30,

June 30,



2022



2021



2022



2021

Revenues:








Homebuilding








Home sale revenues

$
3,809,601


$
3,235,379


$
6,879,914


$
5,831,889

Land sale and other revenues


33,810



33,076



66,969



60,235




3,843,411



3,268,455



6,946,883



5,892,124

Financial Services


82,775



91,029



166,918



197,150

Total revenues


3,926,186



3,359,484



7,113,801



6,089,274










Homebuilding Cost of Revenues:








Home sale cost of revenues


(2,631,356
)


(2,375,495
)


(4,812,430
)


(4,311,130
)
Land sale and other cost of revenues


(31,656
)


(31,195
)


(63,657
)


(55,831
)



(2,663,012
)


(2,406,690
)


(4,876,087
)


(4,366,961
)









Financial Services expenses


(43,847
)


(40,411
)


(87,333
)


(80,086
)
Selling, general, and administrative expenses


(351,256
)


(272,286
)


(680,279
)


(543,973
)
Loss on debt retirement


—



—



—



(61,469
)
Other expense, net


(3,498
)


(624
)


(5,636
)


(3,259
)
Income before income taxes


864,573



639,473



1,464,466



1,033,526

Income tax expense


(212,138
)


(136,074
)


(357,308
)


(226,020
)
Net income

$
652,435


$
503,399


$
1,107,158


$
807,506










Per share:








Basic earnings

$
2.74


$
1.91


$
4.56


$
3.04

Diluted earnings

$
2.73


$
1.90


$
4.54


$
3.03

Cash dividends declared

$
0.15


$
0.14


$
0.30


$
0.28










Number of shares used in calculation:








Basic


236,328



262,099



241,036



263,744

Effect of dilutive securities


1,318



648



1,193



627

Diluted


237,646



262,747



242,229



264,371

PulteGroup, Inc.
Condensed Consolidated Balance Sheets
($000's omitted)
(Unaudited)







June 30, 2022

December 31, 2021





ASSETS









Cash and equivalents

$
662,780

$
1,779,088
Restricted cash


69,324


54,477
Total cash, cash equivalents, and restricted cash


732,104


1,833,565
House and land inventory


10,729,444


9,047,569
Land held for sale


32,772


29,276
Residential mortgage loans available-for-sale


553,789


947,139
Investments in unconsolidated entities


150,496


98,155
Other assets


1,239,870


1,110,966
Intangible assets


141,337


146,923
Deferred tax assets


120,524


139,038


$
13,700,336

$
13,352,631





LIABILITIES AND SHAREHOLDERS’ EQUITY









Liabilities:




Accounts payable

$
750,508

$
621,168
Customer deposits


1,027,938


844,785
Deferred tax liabilities


167,845


165,519
Accrued and other liabilities


1,535,901


1,576,478
Financial Services debt


442,816


626,123
Notes payable


2,030,112


2,029,043



5,955,120


5,863,116
Shareholders' equity


7,745,216


7,489,515


$
13,700,336

$
13,352,631

PulteGroup, Inc.
Consolidated Statements of Cash Flows
($000's omitted)
(Unaudited)





Six Months Ended


June 30,



2022



2021

Cash flows from operating activities:




Net income

$
1,107,158


$
807,506

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




Deferred income tax expense


20,823



4,781

Land-related charges


8,013



3,254

Loss on debt retirement


—



61,469

Depreciation and amortization


33,393



35,407

Share-based compensation expense


29,640



21,603

Other, net


(58
)


(2,922
)
Increase (decrease) in cash due to:




Inventories


(1,683,129
)


(632,647
)
Residential mortgage loans available-for-sale


393,350



(16,384
)
Other assets


(87,569
)


(85,049
)
Accounts payable, accrued and other liabilities


280,722



235,050

Net cash provided by operating activities


102,343



432,068

Cash flows from investing activities:




Capital expenditures


(62,557
)


(31,547
)
Investments in unconsolidated entities


(50,480
)


(15,920
)
Distributions of capital from unconsolidated entities


3,010



10,500

Business acquisition


(10,400
)


(10,400
)
Other investing activities, net


(2,713
)


(17
)
Net cash used in investing activities


(123,140
)


(47,384
)
Cash flows from financing activities:




Repayments of notes payable


(4,152
)


(797,395
)
Borrowings under revolving credit facility


110,000



—

Repayments under revolving credit facility


(110,000
)


—

Financial Services repayments, net


(183,307
)


(59,193
)
Debt issuance costs


(11,167
)


—

Stock option exercises


—



11

Share repurchases


(794,227
)


(353,703
)
Cash paid for shares withheld for taxes


(13,614
)


(10,607
)
Dividends paid


(74,197
)


(74,910
)
Net cash used in financing activities


(1,080,664
)


(1,295,797
)
Net decrease in cash, cash equivalents, and restricted cash


(1,101,461
)


(911,113
)
Cash, cash equivalents, and restricted cash at beginning of period


1,833,565



2,632,235

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

$
732,104


$
1,721,122






Supplemental Cash Flow Information:




Interest paid (capitalized), net

$
230


$
11,606

Income taxes paid (refunded), net

$
290,571


$
154,658

PulteGroup, Inc.
Segment Data
($000's omitted)
(Unaudited)













Three Months Ended

Six Months Ended



June 30,

June 30,




2022



2021



2022



2021

HOMEBUILDING:









Home sale revenues


$
3,809,601


$
3,235,379


$
6,879,914


$
5,831,889

Land sale and other revenues



33,810



33,076



66,969



60,235

Total Homebuilding revenues



3,843,411



3,268,455



6,946,883



5,892,124











Home sale cost of revenues



(2,631,356
)


(2,375,495
)


(4,812,430
)


(4,311,130
)
Land sale and other cost of revenues



(31,656
)


(31,195
)


(63,657
)


(55,831
)
Selling, general, and administrative expenses ("SG&A")



(351,256
)


(272,286
)


(680,279
)


(543,973
)
Loss on debt retirement



—



—



—



(61,469
)
Other expense, net



(4,645
)


(1,460
)


(6,719
)


(3,998
)
Income before income taxes


$
824,498


$
588,019


$
1,383,798


$
915,723











FINANCIAL SERVICES:









Income before income taxes


$
40,075


$
51,454


$
80,668


$
117,803











CONSOLIDATED:









Income before income taxes


$
864,573


$
639,473


$
1,464,466


$
1,033,526

PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)











Three Months Ended

Six Months Ended


June 30,

June 30,



2022


2021


2022


2021









Home sale revenues

$
3,809,601

$
3,235,379

$
6,879,914

$
5,831,889









Closings - units








Northeast


386


497


648


814
Southeast


1,085


1,175


2,111


2,229
Florida


1,779


1,692


3,212


3,112
Midwest


1,131


1,042


2,075


1,881
Texas


1,483


1,519


2,693


2,744
West


1,313


1,307


2,477


2,496



7,177


7,232


13,216


13,276
Average selling price

$
531

$
447

$
521

$
439









Net new orders - units








Northeast


384


475


809


1,083
Southeast


1,304


1,364


2,635


2,925
Florida


1,554


2,203


3,427


4,607
Midwest


842


1,300


2,005


2,861
Texas


1,225


1,459


2,739


3,351
West


1,109


1,521


2,774


3,347



6,418


8,322


14,389


18,174
Net new orders - dollars

$
3,903,999

$
4,258,133

$
8,635,271

$
8,888,450









Unit backlog








Northeast






949


1,222
Southeast






3,000


3,036
Florida






5,645


5,149
Midwest






2,618


3,179
Texas






3,145


3,660
West






3,819


3,810







19,176


20,056
Dollars in backlog





$
11,614,167

$
9,849,743

PulteGroup, Inc.
Segment Data, continued
($000's omitted)
(Unaudited)











Three Months Ended

Six Months Ended


June 30,

June 30,



2022



2021



2022



2021

MORTGAGE ORIGINATIONS:








Origination volume


4,568



5,296



8,625



10,004

Origination principal

$
1,754,715


$
1,811,523


$
3,294,613


$
3,376,191

Capture rate


78.2
%


85.8
%


79.5
%


86.9
%

Supplemental Data
($000's omitted)
(Unaudited)











Three Months Ended

Six Months Ended


June 30,

June 30,



2022



2021



2022



2021










Interest in inventory, beginning of period

$
158,670


$
193,352


$
160,756


$
193,409

Interest capitalized


31,338



31,476



62,921



66,103

Interest expensed


(38,454
)


(39,395
)


(72,123
)


(74,079
)
Interest in inventory, end of period

$
151,554


$
185,433


$
151,554


$
185,433

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

This report contains information about our operating results reflecting certain adjustments, including net income, diluted earnings per share ("EPS"), operating margin, and debt-to-capital ratio. 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. We believe that reflecting these adjustments provides investors relevant and useful information for evaluating the comparability of financial information presented and comparing our profitability and liquidity 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, except per share data):

Adjusted EPS



Three Months Ended

Results of Operations Classification

June 30,



2022


2021







Net income, as reported


$
652,435

$
503,399

Insurance adjustments
SG&A

*


(46,215
)
Income tax effect of the above item
Income tax expense

*


11,323

Tax benefit
Income tax expense


—


(12,078
)
Adjusted net income


$
652,435

$
456,429







EPS (diluted), as reported


$
2.73

$
1.90

Adjusted EPS (diluted)


$
2.73

$
1.72

Adjusted Operating Margin


Three Months Ended


June 30,


2022

2021









Home sale revenues

$
3,809,601



$
3,235,379











Gross margin (a)

$
1,178,245

30.9
%

$
859,884

26.6
%









SG&A, as reported

$
351,256

9.2
%

$
272,286

8.4
%
Insurance adjustments

*

*


46,215

1.4
%
Adjusted SG&A

$
351,256

9.2
%

$
318,501

9.8
%









Operating margin, as reported (b)



21.7
%



18.2
%
Adjusted operating margin (c)



21.7
%



16.7
%









*Item not meaningful for the period presented
(a) Gross margin represents home sale revenues minus home sale cost of revenues
(b) Operating margin represents gross margin less SG&A
(c) Adjusted operating margin represents gross margin less adjusted SG&A

Debt-to-Capital Ratios







June 30, 2022

December 31, 2021
Notes payable

$
2,030,112


$
2,029,043

Shareholders' equity


7,745,216



7,489,515

Total capital

$
9,775,328


$
9,518,558

Debt-to-capital ratio


20.8
%


21.3
%

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726005114/en/

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

Company Name:	PulteGroup Inc.
Stock Symbol:	PHM
Market:	NYSE
Website:	pultegroupinc.com