MDC(US:MDC)2020-10-29 18:48Financial Performance - Home sale revenues for Q3 2020 reached $1,000.5 million, a 33% increase from $750.3 million in Q3 2019[107] - Gross profit for Q3 2020 was $205.4 million, with a gross margin of 20.5%, compared to 18.8% in Q3 2019[107] - Net income for Q3 2020 was $98.9 million, or $1.49 per diluted share, representing a 96% increase from $50.6 million, or $0.79 per diluted share, in Q3 2019[110] - Homebuilding pretax income for Q3 2020 was $101.7 million, a 109% increase from $48.7 million in Q3 2019[114] - Financial services pretax income increased by 73% to $25.4 million in Q3 2020, driven by higher mortgage origination volumes[110] Home Sales and Orders - The dollar value of net new home orders increased by 89% year-over-year, with a 73% increase in the number of orders and a 10% increase in average selling price[111] - The number of new home deliveries for the three months ended September 30, 2020, was 2,147, an increase of 25% from 1,713 in the same period of 2019[121] - The cancellation rate decreased year-over-year across all segments, with total cancellations as a percentage of homes in beginning backlog at 12% for Q3 2020, down from 15% in Q3 2019[148] - As of September 30, 2020, the backlog included 6,511 homes valued at $3.1 billion, representing a 41% increase in the number of homes and a 47% increase in dollar value compared to the previous year[149] Market Segments Performance - The West segment reported a 22% increase in home sale revenues to $552,319,000 for the three months ended September 30, 2020, compared to $410,414,000 in 2019[121] - The Mountain segment saw a 26% increase in home sale revenues to $347,095,000 for the three months ended September 30, 2020, from $263,802,000 in the prior year[121] - The East segment experienced a 35% increase in home sale revenues to $101,135,000 for the three months ended September 30, 2020, compared to $76,058,000 in 2019[121] Assets and Growth - The dollar value of homes in backlog was $3.1 billion as of September 30, 2020, a 47% increase from the prior year[109] - Total homebuilding assets increased by 10% to $3.34 billion as of September 30, 2020, compared to $3.03 billion at the end of 2019[119] - The total number of active subdivisions increased by 2% to 194 for the three months ended September 30, 2020, compared to 190 in the same period of 2019[139] - The company acquired 3,555 lots in Q3 2020, a 63% increase over the prior year period[109] Selling Prices and Margins - The average selling price of homes delivered increased by 6% to $466,000 for the three months ended September 30, 2020, from $438,000 in the prior year[121] - Gross margin from home sales for the three months ended September 30, 2020, increased by 170 basis points year-over-year to 20.5%[129] Financial Services - Financial services revenues for Q3 2020 reached $36.8 million, a 64% increase from $22.4 million in Q3 2019, driven primarily by mortgage operations[157] - The mortgage operations segment saw a 146% increase in pretax income for Q3 2020, totaling $20.8 million, attributed to higher interest rate lock volume and increased net interest income[157] - Total mortgage loan originations for Q3 2020 were 1,476 loans, a 35% increase from 1,095 loans in Q3 2019, with principal amounting to $563.0 million[161] - The capture rate for mortgage loans as a percentage of all homes delivered increased to 68% in Q3 2020, up from 64% in Q3 2019[161] Cash Flow and Financing - During the nine months ended September 30, 2020, the company generated $29.4 million from operating activities, compared to a cash usage of $33.1 million in the same period of 2019[182] - Cash provided from the sale of mortgage loans increased to $36.5 million for the nine months ended September 30, 2020, up from $32.2 million in the prior year[182] - The company had $130.9 million of mortgage loans obligated for repurchase under the Mortgage Repurchase Facility as of September 30, 2020[178] - The company has an effective shelf registration statement allowing the issuance of equity, debt, or hybrid securities up to $2.0 billion, with $1.70 billion remaining after a $300 million issuance of senior notes[168] Tax and Compliance - The overall effective income tax rate for Q3 2020 was 21.5%, compared to 19.5% in Q3 2019, resulting in an income tax expense of $27.1 million[162] - The company believes it is in compliance with all representations, warranties, and covenants included in its financial agreements as of September 30, 2020[175] Interest Rate and Risk Management - Changes in interest rates do not affect the fair value of fixed-rate debt instruments, but they do impact earnings and cash flows for variable-rate debt[198] - HomeAmerican's economic hedging philosophy limits market risk associated with mortgages sold forward[197] - Interest rate lock commitments are used to manage price risk on fluctuations in interest rates for mortgage loans in inventory[196]