• Closings Increased 17% to 6,031 Homes
• Home Sale Revenues Increased 25% to $2.6 Billion
• Gross Margin Increased 10 Basis Points to 24.0%
• SG&A Decreased 180 Basis Points to 9.8% of Home Sale Revenues
• Operating Margin Expanded 190 Basis Points to 14.2%
• Net New Orders Increased 1% to 5,350; Value of Net New Orders Increased 1% to $2.3 Billion
• Unit Backlog Up 3% to 11,164 Homes; Backlog Value Increased 5% to $4.9 Billion
• Company Repurchased 2.4 Million Shares for $67 Million
ATLANTA – Oct. 23, 2018 - PulteGroup, Inc. (NYSE: PHM) announced today financial results for its third quarter ended September 30, 2018. For the quarter, the Company reported net income of $290 million, or $1.01 per share compared with prior year net income of $178 million, or $0.58 per share. The higher net income for the period was primarily the result of a 25% increase in homebuilding revenues, in combination with a 190 basis point expansion of operating margin.
“Consistent with our stated strategies, PulteGroup continues to successfully deliver strong earnings growth, while achieving high returns on invested capital and equity,” said Company President and CEO, Ryan Marshall. “By focusing on intelligently growing our business, while realizing increased operating efficiencies, we leveraged 25% growth in homebuilding revenues into a 74% gain in earnings to $1.01 per share.”
“The critical underpinnings that have supported a slow but steady housing recovery, including a strong economy, low unemployment, high consumer confidence and limited home inventory, remain solidly in place,” continued Marshall. “While buyer concerns around affordability and rising mortgage rates appear to have impacted near term market dynamics, traffic trends indicate that buyer interest levels are still high and that the overall housing recovery remains on track.”
Third Quarter Results
Home sale revenues for the third quarter increased 25% over the prior year to $2.6 billion. The higher revenues for the period reflect a 17% increase in closings to 6,031 homes, combined with a 7%, or $27,000, increase in average sales price to $427,000.
Home sale gross margin for the third quarter was 24.0%, which is up 10 basis points over the prior year and consistent with the Company’s reported gross margin for the second quarter of 2018. Homebuilding SG&A expense for the quarter was $253 million, or 9.8% of home sale revenues, compared with $237 million, or 11.6% of home sale revenues, in the prior year. Operating margin for the third quarter expanded 190 basis points over last year to 14.2%.
Net new orders for the third quarter increased 1% to 5,350 homes. The value of third quarter net new orders was $2.3 billion, which is an increase of 1% over the prior year. For the quarter, the Company operated out of 843 communities compared with 778 communities in the third quarter of 2017.
Unit backlog for the quarter was up 3% over the third quarter of last year to 11,164 homes, with backlog value increasing 5% to $4.9 billion. The average price of homes in backlog increased 2% over the prior year to $440,000.
Third quarter pretax income for the Company's financial services operations increased 10% to $20 million. The increase in pretax income for the period was driven by higher mortgage origination volumes resulting from growth in the Company’s homebuilding operations. Mortgage capture rate for the quarter was 75%, compared with 80% in the prior year.
During the quarter, the Company repurchased 2.4 million common shares for $67 million, or an average price of $28.14 per share.
A conference call discussing PulteGroup's third quarter 2018 results is scheduled for Tuesday, October 23, 2018, at 8:30 a.m. Eastern Time. Interested investors can access the live webcast via PulteGroup's corporate website at www.pultegroupinc.com.
This press 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 impairment charge 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, including, but not limited to the Tax Cuts and Jobs Act 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; 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, 2017, 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.
PulteGroup, Inc. (NYSE: PHM), based in Atlanta, Georgia, is one of America's largest homebuilding companies with operations in approximately 50 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes 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 conducts extensive research to provide homebuyers with innovative solutions and consumer inspired homes and communities to make lives better.
For more information about PulteGroup, Inc. and PulteGroup brands, go to www.pultegroupinc.com;
www.pulte.com; www.centex.com; www.delwebb.com; www.divosta.com and www.jwhomes.com.