• Adjusted Net Income of $1.01 Per Share
• Net New Orders Increased 13% to 6,031 Homes; Net New Order Value Increased 11% to $2.5 Billion
• Closings Increased 3% to 6,186 Homes
• Home Sale Revenues Increased 3% to $2.6 Billion
• Reported Homebuilding Gross Margin of 23.1%; Adjusted Gross Margin of 23.4%
• Unit Backlog Up 4% to 11,638 Homes; Backlog Value Increased 2% to $5.0 Billion
• Company Repurchased 4.1 Million Shares of Stock in the Quarter for $136 Million
“Improving demand dynamics continued throughout the quarter, as lower interest rates and improved affordability had a positive impact on buyer interest,” said Ryan Marshall, PulteGroup President and CEO. “The 13% gain in orders that we realized in the third quarter reflects this improved demand environment, particularly among first-time buyers where orders were up 39% over last year.”
“Given a broadly favorable macroeconomic backdrop and expectations for interest rates to remain low, we see the opportunity for housing demand to continue moving higher over time,” added Marshall. “Within this environment, our strong balance sheet and outstanding local market operations have the Company well positioned to grow our business while continuing to deliver high returns on equity and invested capital.”
Third Quarter Results
Home sale revenues for the third quarter increased 3% over the prior year to $2.6 billion. The higher revenues for the period reflect a 3% increase in closings to 6,186 homes. The average price of homes closed was $426,000, which is consistent with the prior year.
The Company’s reported home sale gross margin for the third quarter was 23.1%. The Company’s third quarter adjusted home sale gross margin, which excludes the $9 million pre-tax warranty charge, was 23.4%. Homebuilding SG&A expense for the quarter was $271 million, or 10.3% of home sale revenues, compared with $253 million, or 9.8% of home sale revenues, in the prior year.
Net new orders for the third quarter increased 13% over the prior year to 6,031 homes. The value of third quarter net new orders was $2.5 billion, which is an increase of 11% over the prior year. In the third quarter, the Company operated out of 865 communities which is an increase of 4% over the comparable prior year period.
Unit backlog at the end of the quarter totaled 11,638 homes, which is up 4% over the third quarter of last year. Backlog value for the third quarter was $5.0 billion, which is an increase of 2% over the third quarter of 2018.
Third quarter pretax income for the Company's financial services operations increased 64% over the prior year to $32 million. The higher pretax income was driven by an increase in mortgage origination volumes associated with growth in the Company’s homebuilding operations and higher capture rates, coupled with improved margins in our mortgage operations resulting from the declining rate environment. Mortgage capture rate for the quarter was 84%, up from 75% last year.
During the quarter, the Company repurchased 4.1 million common shares for $136 million, or an average price of $32.93 per share. For the first nine months of 2019, the Company repurchased a total of 7.7 million common shares for $244 million, or an average price of $31.86 per share.
PulteGroup ended the quarter with a debt-to-total capital ratio of 34.6%, which is down from 38.6% at the end of 2018.
A conference call discussing PulteGroup's third quarter 2019 results is scheduled for Tuesday, October 22, 2019, 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 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the Company’s other public filings with the Securities and Exchange Commission for a further discussion of these and other risks and uncertainties applicable to our businesses. The Company 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 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 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 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.