M.D.C Holdings, Inc. (NYSE: MDC), Denver, on Thursday morning reported net income of $54.7 million, or $0.95 per diluted share, for the quarter and full year ended December 31, 2018, up 123% from $24.6 million, or $0.43 per diluted share in the prior year quarter. Analysts polled by Dow Jones were expecting a gain of $1.15 per share.

Richmond American's Cityscape collection.
Richmond American's Cityscape collection.

Among the results as reported by the company:

  • Home sale revenues up 22% to $858.5 million from $702.6 million
    • Average selling price of homes delivered up 4% to $469,900
  • Pretax income up 34% to $69.3 million from $51.8 million
    • $6.9 million loss on investments in 2018 fourth quarter vs. $0.1 million loss in 2017 fourth quarter
    • Effective tax rate of 21.0% in 2018 fourth quarter vs 52.6% in 2017 fourth quarter
  • Gross margin from home sales up 80 basis points to 18.1% from 17.3%
    • $10.0 million impairment charge in 2018 fourth quarter vs. $0.6 million in 2017 fourth quarter
    • Excluding impairments, gross margins increased 190 basis points to 19.3% from 17.4%
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 70 basis points to 10.9% from 11.6%
  • Dollar value of net new orders of $453.3 million vs. $574.3 million in 2017 fourth quarter as new orders dropped 15% to 1,059 from 1,252
  • Backlog dollar value at December 31, 2018 down 11% year-over-year to $1.43 billion
    • Gross margin from home sales in backlog at 12/31/2018 comparable to 2018 full year closing gross margin (excluding impairments) of 19.0%
    • Backlog conversion ratio (home deliveries divided by beginning backlog) for the 2019 first quarter estimated to be in the 42% to 44% range
  • Active subdivision count at 12/31/2018 of 166, up 10% year-over-year and 5% from 9/30/2018
  • Lots controlled of 23,187 at 12/31/2018, up 20% year-over-year
  • Quarterly cash dividend of $0.30 ($1.20 annualized) and 8% stock dividend declared in January 2019

For the full year:

  • Home sale revenues up 19% to $2.98 billion from $2.50 billion
    • Average selling price of homes delivered up 7% to $481,200
  • Pretax income up 15% to $263.9 million from $229.7 million
    • $3.7 million loss on investments in 2018 vs $53.7 million gain in 2017
  • Net income of $210.8 million, or $3.66 per diluted share, up 49% from $141.8 million, or $2.48 per diluted share
    • Effective tax rate of 20.1% in 2018 vs 38.3% in 2017
  • Gross margin from home sales up 170 basis points to 18.3% from 16.6%
    • $21.9 million impairment charge in 2018 vs. $10.0 million in 2017
    • Excluding impairments, gross margins increased 200 basis points to 19.0% from 17.0%
  • Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 40 basis points to 11.1% from 11.5%
  • Dollar value of net new orders of $2.77 billion, up 3% from $2.70 billion
    • Average selling price of net new orders consistent with 2017

Larry A. Mizel, MDC's Chairman and Chief Executive Officer, stated, "The fourth quarter marked a strong end to the year as we made significant year-over-year improvements to our top and bottom line. However, order activity during the quarter was not as robust as it was last year, a sign that buyers are being patient with their purchase decisions. Years of price appreciation coupled with recent uncertainty about mortgage rates have understandably made some buyers cautious and have resulted in a slower sales pace for our industry. Fortunately, we have adjusted our strategy over the past few years to address the rising cost of home ownership by bringing down the price points of our homes. Our more affordable home offerings were well received in 2018, and we anticipate the same will be true in 2019."

He continued, "We continue to believe that the outlook for our industry remains favorable, with rising wages, continuing job growth and positive consumer sentiment providing a healthy economic backdrop. MDC is in a great position to capitalize on these fundamentals thanks to our more affordable product focus, our strong balance sheet and our seasoned management team. As a result, we are optimistic about our company's future as we enter the spring selling season."