01—Abstract
Summary
Summary of the 10-K filed February 6, 2023. Cited figures are marked; the original filing is the authoritative source.
PulteGroup, Inc. reported record-level 2022 results driven by pricing.
Total revenues were $16.2 billiona, up from $13.9 billion in 2021. Net income was $2.62 billion, or $11.01 diluted EPS, compared with $1.95 billion, or $7.43, in 2021. Home sale revenues rose 18% on a 17% higher average selling price, and home sale gross margin reached 29.7% versus 26.4%.
The company also repurchased 24.2 million shares for $1.1 billionb during 2022. The outlook has weakened sharply. Beginning in the second quarter of 2022, rising mortgage rates reduced buyer demand.
Net new orders fell 27% in units for the year, and the cancellation rate rose to 19% from 9%, with a fourth-quarter rate of 32%. Backlog declined to $7.7 billionc (12,169 units) from $9.9 billion (18,003 units). Management expects the more challenging environment to continue through at least 2023, with lower revenues and profitability in those periods.
Its planned responses include limiting land acquisition and development spending in 2023, updating underwriting on land options, and taking a more opportunistic approach to share buybacks. Balance sheet liquidity remained solid at year-end. The company had $1.1 billiond of cash and equivalents, $946.6 million available under its Revolving Credit Facility, and $2.0 billion of unsecured senior notes outstanding.
The debt-to-total capitalization ratio, excluding Financial Services debt, improved to 18.7% from 21.3%. Operating cash flow fell to $668.5 million from $1.0 billion because inventories increased by $2.3 billion, reflecting more unsold homes and longer production cycles.
02—Key points
Key Highlights
- Total revenues of $16.2 billion in 2022, compared with $13.9 billion in 2021; homebuilding generated 98% of 2022 consolidated revenues.
- Net income of $2.62 billion and diluted EPS of $11.01, compared with $1.95 billion and $7.43 in 2021.
- Home sale gross margin of 29.7%, up from 26.4%, with average selling price up 17% to $542,000.
- Net new orders fell 27% in units; the cancellation rate rose to 19% from 9%, and the fourth-quarter cancellation rate was 32%.
- Backlog declined to $7.7 billion (12,169 units) from $9.9 billion (18,003 units) at year-end 2021.
- Repurchased 24.2 million shares for $1.1 billion; $382.9 million remained under the authorization at December 31, 2022. Quarterly dividend of $0.16 per share.
- Management expects a more challenging environment through at least 2023, with lower revenues and profitability, and is limiting 2023 land spending.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 6, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $16.00B$13.74B | +16.5% |
| SG&A Expenses | $1.38B$1.21B | +14.3% |
| Interest Expense | $284K$502K | −43.4% |
| Net Income | $2.62B$1.95B | +34.5% |
| EPS (Basic) | $11.07$7.44 | +48.8% |
| EPS (Diluted) | $11.01$7.43 | +48.2% |
| Shares Outstanding (Basic) | 235.01M259.29M | −9.4% |
| Shares Outstanding (Diluted) | 236.17M259.93M | −9.1% |
05—Questions
Frequently Asked Questions
Why did net new orders and backlog decline in 2022?
The filing attributes the decline to a sharp rise in mortgage interest rates that began in mid-2022, which hurt home affordability and consumer sentiment. Net new orders fell 27% in units, and the cancellation rate increased to 19% from 9%. Backlog dollars fell 22% as a result.
How did pricing and margins hold up despite weaker demand?
Pricing actions taken during robust demand in 2021 and early 2022 supported 2022 results. Average selling price rose 17% and home sale gross margin reached 29.7% versus 26.4% in 2021. The filing says pricing may be significantly more challenged in the near term given lower demand.
What is the company's liquidity position and how is it managing cash?
At December 31, 2022, the company had $1.1 billion of unrestricted cash and equivalents and $946.6 million available under its Revolving Credit Facility, which matures in June 2027. Its $2.0 billion of unsecured senior notes have no repayments due until March 2026. Planned actions include limiting 2023 land acquisition and development spending, maintaining ample liquidity, and taking a more opportunistic approach to share buybacks.
Why did operating cash flow decline, and what drove the land option write-offs?
Operating cash flow was $668.5 million, down from $1.0 billion, mainly because of a $2.3 billion net increase in inventories tied to more unsold homes and longer production cycles. The company wrote off $63.6 million of deposits and pre-acquisition costs in 2022 after terminating a number of land option agreements in response to lower consumer demand.
06—Continue