MDC(MDC) - 2025 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2025, the company reported net income of $151.9 million, a 62% decrease compared to $394.5 million in the prior year[116]. - Home sale revenues decreased by 22% to $4.9 billion in 2025 from $6.3 billion in 2024, driven by a decrease in new home deliveries and average selling prices[116][123]. - Homebuilding pretax income fell to $135.9 million, a decrease of $266.7 million or 66% year-over-year, primarily due to a 340 basis point decrease in gross margins and increased inventory impairments[116][120]. - The financial services business pretax income decreased by 43% to $53.6 million, impacted by reduced loan origination volume[116]. - The West segment experienced an 80% decrease in pretax income, while the East segment reported a 160% loss in pretax income year-over-year[119][120]. - Total mortgage loan originations decreased by 27% to 5,353 loans in 2025, with principal amounting to $2.65 billion, a 22% decline from 2024[151]. - The company's financial services pretax income fell by 43% to $53.6 million in 2025, down from $93.9 million in 2024[149]. Home Sales and Deliveries - New home deliveries decreased by 27% to 8,724 homes in 2025, compared to 11,924 homes in 2024, reflecting a decline in backlog and net home sales[123]. - Total net new orders decreased by 12% to 8,511 homes in 2025, with a total dollar value of $4.957 billion, down from $5.380 billion in 2024[136]. - The average selling price of homes in the West segment increased to $615.9 thousand in 2025, while the total dollar value of net new orders decreased by 17%[136]. - Cancellation rate as a percentage of gross sales decreased to 15% in 2025, down from 16% in 2024, attributed to a decrease in beginning backlog[144]. - As of December 31, 2025, the company had 800 homes in backlog valued at $541.4 million, reflecting decreases of 21% in the number of homes and 18% in total value from December 31, 2024[145]. Inventory and Assets - Total homebuilding assets increased by 1% to $6.4 billion as of December 31, 2025, driven by growth in the West and East segments[121]. - Total inventory impairments for the year ended December 31, 2025 amounted to $77.653 million, a significant increase from $18.250 million in 2024[129]. - Total owned and optioned lots decreased by 8% to 35,216 as of December 31, 2025, compared to 38,357 in 2024[148]. - The company completed 2,766 unsold homes, a 74% increase from 1,593 in 2024, while homes under construction decreased by 74% to 953[147]. Expenses and Costs - The gross margin percentage from home sales decreased to 14.7% in 2025 from 18.0% in 2024, influenced by increased inventory impairments and higher selling, general and administrative expenses[111][116]. - General and administrative expenses decreased to $299.120 million in 2025, down from $421.022 million in 2024, reflecting a reduction in salary-related expenses[131]. - Marketing expenses increased to $141.297 million in 2025, driven by the full year of Woodside marketing expenses compared to only post-merger recognition in 2024[132]. - Commissions expenses decreased to $161.886 million in 2025, down from $188.811 million in 2024, due to decreases in home sale revenues[133]. Cash Flow and Liquidity - The company ended the year with total cash and cash equivalents of $330.6 million and total liquidity of $1.73 billion, with no senior note maturities until 2030[115]. - During the year ended December 31, 2025, net cash used in operating activities was $368.8 million, compared to cash provided by operating activities of $183.0 million in the prior year[173]. - Net cash provided by investing activities was $150.2 million during the year ended December 31, 2025, compared to cash used in investing activities of $150.9 million in the prior year[174]. - Net cash used in financing activities was $301.8 million during the year ended December 31, 2025, a decrease from $844.9 million in the prior year[175]. - Cash used for dividend payments increased to $195.2 million in 2025, compared to $155.5 million in 2024, primarily due to a one-time dividend declared prior to the Woodside Merger[176]. Debt and Financing - As of December 31, 2025, the company had outstanding senior notes totaling $1.50 billion, with future interest payments of $1.12 billion[156]. - The company’s Revolving Credit Facility was increased to $1.40 billion, with a potential accordion feature allowing it to rise to $1.90 billion[162]. - As of December 31, 2025, the availability under the Revolving Credit Facility was approximately $1.37 billion, with $0.0 million outstanding[166]. - HomeAmerican had committed repurchase facilities of up to an aggregate of $300.0 million as of December 31, 2025, with the potential to increase by up to $150.0 million under certain conditions[167]. Insurance and Reserves - A 10% increase in both claim frequency and average cost per claim would result in an increase in insurance reserves and an associated increase in expense of approximately $21.2 million[190]. - A 10% decrease in both claim frequency and average cost per claim would result in a decrease in insurance reserves and an associated reduction in expense of $19.2 million[190]. - The establishment of reserves for estimated losses associated with insurance policies is based on actuarial studies and historical trends, which may fluctuate[190].