- 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
“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.
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.
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.
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