M.D.C Holdings, Inc., Denver (NYSE: MDC) on Wednesday reported net income of $54.6 million, or $0.86 per diluted share, for the second quarter ended June 30, 2019. The gain was down 15% from $63.9 million or $1.03 per diluted share in the prior-year quarter. Wall Street was expecting a gain of $0.79 per share.
Among the results:
- Home sale revenues of $732.8 million, down 2% from $749.6 million
- Unit deliveries nearly unchanged at 1,514
- Average selling price of deliveries down 2% to $484,000
- Pretax income of $74.3 million, down 3% from $76.6 million
- Effective tax rate of 26.6% vs. 16.6%
- Gross margin from home sales up 40 basis points to 19.5% from 19.1%
- Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") of 11.3% vs. 10.9%
- Dollar value of net new orders up 25% to $967.9 million from $776.2 million
- Unit net orders increased 32% to 2,273
- Monthly sales absorption pace increased 12% to 4.1
- Average selling price of net orders down 6% to $425,80
- Backlog dollar value at June 30, 2019 down 1% year-over-year to $1.93 billion
- Estimated gross margin from homes in backlog at June 30, 2019 slightly lower than 2019 second quarter closing gross margin of 19.5%
- Backlog conversion ratio (home deliveries divided by beginning backlog) for the third quarter estimated to be in the 39% to 41% range
- Active subdivision count at June 30, 2019 of 187, up 14% year-over-year and 13% from December 31, 2018
Larry A. Mizel, MDC's chairman and CEO, stated, "MDC turned in another strong performance in the second quarter of 2019, generating net income of $55 million, or $0.86 per diluted share. We continued to see healthy demand for our new home offerings during the quarter, with a 32% year-over-year increase in net new orders on an absorption pace of 4.1 homes per community per month. The robust demand we experienced has helped to stabilize the environment for pricing and incentives, which allowed us to achieve a home building gross margin for the quarter of 19.5%. It also resulted in the biggest quarter-end unit backlog for our company in over 13 years. These achievements were a direct result of the investments we have made over the last several years, our focus on the more affordable segment and the ability of our talented employees to execute our strategic plan."
Mizel continued, "We ended the second quarter with 14% more active communities than we had at the end of the second quarter of 2018. A majority of these communities are targeted for the more affordable segment, which continues to be the deepest part of the market. We believe this combination of higher community count and favorable market positioning provides MDC with the opportunity for growth as we enter the second half of 2019."
