PR Newswire | Apr 29, 2021 06:01AM EDT

04/29 05:00 CDT

M.D.C. Holdings Announces First Quarter 2021 Results201% increase in net income driven by home sale revenues growth of 49% and a 200 basis point expansion to our gross margin from home sales to 21.9% DENVER, April 29, 2021

DENVER, April 29, 2021 /PRNewswire/ -- M.D.C Holdings, Inc. (NYSE: MDC), one of the nation's leading homebuilders, announced results for the quarter ended March 31, 2021.

Larry A. Mizel, MDC's Executive Chairman, stated, "MDC delivered another quarter of strong profitability, generating net income of $111 million, or $1.51 per diluted share. Home sale revenues grew 49% year-over-year on a 41% increase in closings and 6% rise in average selling prices. We continue to see heightened demand for our homes, as evidenced by the 34% year-over-year increase to unit orders for the quarter. The only constraint to our sales efforts are ones that we are imposing on ourselves, in an effort to balance orders and pricing to best manage our backlog. These efforts resulted in a 200 basis point expansion to our gross margin from home sales in the quarter to 21.9%. We have also been successful in leveraging our overhead expenses, lowering our SG&A ratio by 180 basis points in the quarter to 11.0%. Given the size of our quarter-ending backlog and the current state of the housing market, we believe MDC is in a great position to deliver excellent results for the full year."

Mr. Mizel continued, "We continue to run our business in a prudent manner by focusing on steady growth in each of our markets while maintaining a strong capital position. This focus was recognized by S&P Global Ratings earlier this month, which upgraded our credit rating to investment grade. We believe this is validation for our long-term approach to the business and the strength of our balance sheet, which we feel benefits both debt and equity investors over time."

David D. Mandarich, MDC's President and Chief Executive Officer stated, "While the entire industry is benefiting from the ongoing imbalance between housing supply and demand, we believe MDC is uniquely positioned to succeed in today's market thanks to our continued focus on more affordable price points and our build-to-order model. There is a real need for additional housing in this country, especially for people looking to buy their first home, and a majority of our communities cater to these buyers. There is also a desire for new home customization among these buyers, which is another benefit that our business model offers. We believe these two trends will be in place for the foreseeable future, giving us a great runway for continued success."

2021 First Quarter Highlights and Comparisons to 2020 First Quarter

? Home sale revenues increased 49% to $1.04 billion from $697.1 million

? Unit deliveries up 41% to 2,178

? Average selling price of deliveries up 6% to $478,000

? Homebuilding pretax income increased 129% to $113.5 million from $49.7 million

? Gross margin from home sales increased 200 basis points to 21.9% from 19.9%

? Selling, general and administrative expenses as a percentage of home sale revenues ("SG&A rate") improved by 180 basis points to 11.0%

? Financial services pretax income increased $31.9 million to $30.8 million, compared to a pretax loss of $1.1 million in the first quarter of 2020

? Net income of $110.7 million, or $1.51 per diluted share, up 201% from $36.8 million or $0.52 per diluted share*

? Effective tax rate of 23.3% vs. 24.3%

? Dollar value of net new orders increased 50% to $1.64 billion from $1.09 billion

? Unit net orders increased 34% to 3,209

? Average selling price of net orders up 12%

? Dollar value of ending backlog up 81% to $3.93 billion from $2.17 billion

? Unit backlog increased 65% to 7,686

? Average selling price of homes in backlog up 9%

* Per share amount for the 2020 first quarter has been adjusted for the 8% stock dividend declared and paid in the 2021 first quarter.

2021 Outlook and Other Selected Information1

? Home deliveries for the 2021 second quarter between 2,500 and 2,700

? Average selling price for 2021 second quarter unit deliveries of approximately $500,000

? Gross margin from home sales for the 2021 second quarter of approximately 22.5% (excluding impairments and warranty adjustments)

? Full year 2021 home deliveries between 10,000 and 11,000

? Active subdivision count goal of at least 10% growth during 2021 (from December 31, 2020 to December 31, 2021)

? Lots controlled of 32,023 at March 31, 2021, up 18% year-over-year

Quarterly cash dividend of forty cents ($0.40) per share declared on April? 26, 2021, up 31% year-over-year (after adjusting for 8% stock dividend in March 2021)

1 See "Forward-Looking Statements" below.

About MDC

M.D.C. Holdings, Inc. was founded in 1972. MDC's homebuilding subsidiaries, which operate under the name Richmond American Homes, have built and financed the American Dream for more than 210,000 homebuyers since 1977. MDC's commitment to customer satisfaction, quality and value is reflected in each home its subsidiaries build. MDC is one of the largest homebuilders in the United States. Its subsidiaries have homebuilding operations across the country, including the metropolitan areas of Denver, Colorado Springs, Salt Lake City, Las Vegas, Phoenix, Tucson, Riverside-San Bernardino, Los Angeles, San Diego, Orange County, San Francisco Bay Area, Sacramento, Washington D.C., Baltimore, Orlando, Jacksonville, Seattle, Portland and Boise. The Company's subsidiaries also provide mortgage financing, insurance and title services, primarily for Richmond American homebuyers, through HomeAmerican Mortgage Corporation, American Home Insurance Agency, Inc. and American Home Title and Escrow Company, respectively. M.D.C. Holdings, Inc. is traded on the New York Stock Exchange under the symbol "MDC." For more information, visit www.mdcholdings.com.

Forward-Looking Statements

Certain statements in this release, including any statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of MDC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, (1) general economic conditions, including the impact of the COVID-19 pandemic, changes in consumer confidence, inflation or deflation and employment levels; (2) changes in business conditions experienced by MDC, including restrictions on business activities resulting from the COVID-19 pandemic, cancellation rates, net home orders, home gross margins, land and home values and subdivision counts; (3) changes in interest rates, mortgage lending programs and the availability of credit; (4) changes in the market value of MDC's investments in marketable securities; (5) uncertainty in the mortgage lending industry, including repurchase requirements associated with HomeAmerican Mortgage Corporation's sale of mortgage loans (6) the relative stability of debt and equity markets; (7) competition; (8) the availability and cost of land and other raw materials used by MDC in its homebuilding operations; (9) the availability and cost of performance bonds and insurance covering risks associated with our business; (10) shortages and the cost of labor; (11) weather related slowdowns and natural disasters; (12) slow growth initiatives; (13) building moratoria; (14) governmental regulation, including orders addressing the COVID-19 pandemic, the interpretation of tax, labor and environmental laws; (15) terrorist acts and other acts of war; (16) changes in energy prices; and (17) other factors over which MDC has little or no control. Additional information about the risks and uncertainties applicable to MDC's business is contained in MDC's Form 10-Q for the quarter ended March 31, 2021, which is scheduled to be filed with the Securities and Exchange Commission today.All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed in this press release will increase with the passage of time. MDC undertakes no duty to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or webcasts should be consulted.

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)



Three Months Ended March 31,

2021 2020



(Dollars in thousands, except per share amounts)

Homebuilding:

Home sale revenues $ 1,041,858 $697,085

Home cost of sales (813,888) (558,647)

Gross profit 227,970 138,438

Selling, general and administrative (114,993) (89,321) expenses

Interest and other income 967 1,889

Other expense (437) (1,337)

Homebuilding pretax income 113,507 49,669



Financial Services:

Revenues 45,023 21,886

Expenses (15,105) (10,929)

Other income (expense), net 887 (12,064)

Financial services pretax income 30,805 (1,107) (loss)



Income before income taxes 144,312 48,562

Provision for income taxes (33,622) (11,802)

Net income $ 110,690 $36,760



Comprehensive income $ 110,690 $36,760



Earnings per share:

Basic $ 1.58 $0.54

Diluted $ 1.51 $0.52



Weighted average common shares outstanding:

Basic 69,790,927 67,490,537

Diluted 72,788,177 70,125,723



Dividends declared per share $ 0.37 $0.31

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

(Unaudited)



March 31, December 31, 2021 2020



(Dollars in thousands, except per share amounts)

ASSETS

Homebuilding:

Cash and cash equivalents $678,194 $411,362

Restricted cash 17,314 15,343

Trade and other receivables 107,823 72,466

Inventories:

Housing completed or under construction 1,705,424 1,486,587

Land and land under development 1,310,721 1,345,643

Total inventories 3,016,145 2,832,230

Property and equipment, net 60,394 61,880

Deferred tax asset, net 12,802 11,454

Prepaids and other assets 107,428 101,685

Total homebuilding assets 4,000,100 3,506,420

Financial Services:

Cash and cash equivalents 81,100 77,267

Mortgage loans held-for-sale, net 230,789 232,556

Other assets 70,941 48,677

Total financial services assets 382,830 358,500

Total Assets $4,382,930$3,864,920

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable $120,496 $98,862

Accrued and other liabilities 333,880 300,735

Revolving credit facility 10,000 10,000

Senior notes, net 1,384,475 1,037,391

Total homebuilding liabilities 1,848,851 1,446,988

Financial Services:

Accounts payable and accrued liabilities 101,725 95,630

Mortgage repurchase facility 217,482 202,390

Total financial services liabilities 319,207 298,020

Total Liabilities 2,168,058 1,745,008

Stockholders' Equity

Preferred stock, $0.01 par value; 25,000,000 - - shares authorized; none issued or outstanding

Common stock, $0.01 par value; 250,000,000 shares authorized; 70,265,205 and 64,851,126 issued and 703 649 outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in-capital 1,698,109 1,407,597

Retained earnings 516,060 711,666

Total Stockholders' Equity 2,214,872 2,119,912

Total Liabilities and Stockholders' Equity $4,382,930$3,864,920

M.D.C. HOLDINGS, INC.

Consolidated Statement of Cash Flows

(Unaudited)



Three Months Ended March 31,

2021 2020



(Dollars in thousands)

Operating Activities:

Net income $110,690$36,760

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation expense 9,926 4,440

Depreciation and amortization 7,003 5,152

Net (gain) loss on marketable equity securities - 13,268

Deferred income tax expense (1,348) 1,131

Net changes in assets and liabilities:

Trade and other receivables (40,282) (1,611)

Mortgage loans held-for-sale, net 1,767 63,100

Housing completed or under construction (218,655)(178,873)

Land and land under development 34,978 29,051

Prepaids and other assets (23,594) (8,460)

Accounts payable and accrued liabilities 61,558 (1,131)

Net cash used in operating activities (57,957) (37,173)



Investing Activities:

Purchases of marketable securities - (9,782)

Sales of marketable securities - 9,276

Purchases of property and equipment (5,749) (6,512)

Net cash used in investing activities (5,749) (7,018)



Financing Activities:

Payments on mortgage repurchase facility, net 15,092 (40,872)

Repayment of senior notes - (250,000)

Proceeds from issuance of senior notes 347,725 298,050

Dividend payments (26,665) (20,768)

Payments of deferred financing costs (819) -

Issuance of shares under stock-based compensation 1,009 8,194 programs, net

Net cash provided by (used in) financing activities 336,342 (5,396)



Net increase (decrease) in cash, cash equivalents and 272,636 (49,587) restricted cash

Cash, cash equivalents and restricted cash:

Beginning of period 503,972 474,212

End of period $776,608$424,625



Reconciliation of cash, cash equivalents and restricted cash:

Homebuilding:

Cash and cash equivalents $678,194$386,704

Restricted cash 17,314 15,762

Financial Services:

Cash and cash equivalents 81,100 22,159

Total cash, cash equivalents and restricted cash $776,608$424,625

New Home Deliveries



Three Months Ended March 31,

2021 2020 % Change

Home Home Sale Average Home Sale Average Average Homes Homes HomesSale Price Revenues Price Revenues Price Revenues



(Dollars in thousands)

West 1,276$616,611 $483.2871 $405,498$465.646 %52% 4 %

Mountain612 324,717 530.6 435 222,858 512.3 41 %46% 4 %

East 290 100,530 346.7 241 68,729 285.2 20 %46% 22 %

Total 2,178$1,041,858$478.41,547$697,085$450.641 %49% 6 %

Net New Orders



Three Months Ended March 31,

2021 2020 % Change

Monthly Monthly Monthly Dollar Average Average Dollar Average Homes AbsorptionHomes Dollar ValuePrice Absorption HomesValue Price Absorption Value Price Rate * Rate * Rate



(Dollars in thousands)

West 1,775$904,691 $509.75.80 1,382$655,892 $474.6 5.13 28 %38 %7 % 13 %

Mountain1,011562,753 556.6 5.91 693 339,132 489.4 3.54 46 %66 %14 % 67 %

East 423 168,021 397.2 4.62 324 97,723 301.6 3.66 31 %72 %32 % 26 %

Total 3,209$1,635,465$509.65.64 2,399$1,092,747$455.5 4.33 34 %50 %12 % 30 %

*Calculated as total net new orders in period / average active communitiesduring period / number of months in period

Active Subdivisions



Average Active Subdivisions

Active Subdivisions Three Months Ended

March 31, % March 31, %

2021 2020 Change2021 2020 Change

West 97 92 5 %102 90 13 %

Mountain55 64 (14)%57 65 (12) %

East 34 29 17 %31 30 3 %

Total 186 185 1 %190 185 3 %

Backlog



March 31,

2021 2020 % Change

Dollar Average Dollar Average DollarAverage Homes Homes Homes Value Price Value Price Value Price



(Dollars in thousands)

West 4,209$2,157,618$512.62,534$1,227,996$484.666% 76 % 6 %

Mountain2,417$1,355,201560.7 1,469$754,155 513.4 65% 80 % 9 %

East 1,060$414,474 391.0 650 $191,972 295.3 63% 116% 32 %

Total 7,686$ $511.04,653$2,174,123$467.365% 81 % 9 % 3,927,293

Homes Completed or Under Construction (WIP lots)



March 31, %

2021 2020 Change

Unsold:

Completed 36 160 (78)%

Under construction 64 216 (70)%

Total unsold started homes 100 376 (73)%

Sold homes under construction or completed 5,8543,25980 %

Model homes under construction or completed502 502 - %

Total homes completed or under construction6,4564,13756 %

Lots Owned and Optioned (including homes completed or under construction)



March 31, 2021 March 31, 2020

Lots Lots Lots Lots Total Total Total Owned Optioned Owned Optioned % Change

West 12,6583,921 16,579 9,641 2,393 12,034 38 %

Mountain6,790 3,418 10,208 6,540 4,007 10,547 (3) %

East 3,088 2,148 5,236 2,410 2,133 4,543 15 %

Total 22,5369,487 32,023 18,591 8,533 27,124 18 %

Selling, General and Administrative Expenses



Three Months Ended March 31,

2021 2020 Change



(Dollars in thousands)

General and administrative expenses $57,163 $45,089 $12,074

General and administrative expenses as 5.5 %6.5 %-100 bps a percentage of home sale revenues

Marketing expenses $25,703 $21,446 $4,257

Marketing expenses as a percentage of home2.5 %3.1 %-60 bps sale revenues

Commissions expenses $32,127 $22,786 $9,341

Commissions expenses as a percentage 3.1 %3.3 %-20 bps of home sale revenues

Total selling, general and administrative $114,993 $89,321 $25,672expenses

Total selling, general and administrative expenses as a percentage of11.0 %12.8 %-180 bps home sale revenues

Capitalized Interest



Three Months Ended March 31,

2021 2020



(Dollars in thousands)

Homebuilding interest incurred $17,332$16,534

Less: Interest capitalized (17,332)(16,534)

Homebuilding interest expensed $- $-



Interest capitalized, beginning of period $52,777$55,310

Plus: Interest capitalized during period 17,332 16,534

Less: Previously capitalized interest included in home (14,841)(12,767)cost of sales

Interest capitalized, end of period $55,268$59,077

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SOURCE M.D.C. Holdings, Inc.