Pultegroup, Inc. · NYSE:PHM
Pultegroup — J.P. Morgan Homebuilding & Building Products Conference 2018
25 slides from Pultegroup's conference presentation, May 14, 2018
Slide 1: Building On a Strong Foundation
Building On a Strong Foundation JP Morgan Homebuilding Conference May 14, 2018 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to s
Slide 3: Operating Against a Proven Strategy
Operating Against a Proven Strategy 3
Slide 4: Creating Shareholder Value by Delivering Growth and High Returns
Creating Shareholder Value by Delivering Growth and High Returns Focus on the customer: deliver superior build quality and homebuying experience Invest in high-returning, shorter duration land positions Continue to grow revenues through business expansion and market share gains Maintain disciplined
Slide 5: Strategy has Driven Dramatic Gains in Income and Profitability
Strategy has Driven Dramatic Gains in Income and Profitability 2013 2014 2015 2016 2017 Pretax Income ($ millions) Closings 17,766 17,196 17,127 19,951 21,052 $1,400 Home Sale $5.4 $5.7 $5.8 $7.5 $8.3 $1,200 Revenues ($ billions) $1,000 $1,063 Gross Margin 24.1% 26.7% 26.9% 25.0% 23.6% * $934 SG&A %
Slide 6: With Improved Returns
With Improved Returns Return on Invested Capital Return on Equity 18% 25% 16% 15.9% 22.3% 14% 20% 14.4% 14.5% 14.0% 13.4% 12% 15% 10% 15.2% 8% 12.7% 8.1% 10% 10.2% 10.1% 10.5% 6% 4% 5% 2% 0% 0% 2012 2013 2014 2015 2016 2017* 2012 2013* 2014 2015 2016 2017 ** ROIC = (EBIT)/(Average Equity + Average D
Slide 7: And the Return of $2.8 Billion to Shareholders
And the Return of $2.8 Billion to Shareholders Shareholder Friendly $1,200 Share Repurchases ($ millions) Dividends ($ millions) $110 $1,000 PulteGroup has repurchased <25%> of its outstanding shares since 2013 $910 $800 $122 $600 $118 $600 $400 $434 $86 $200 $58 $246 $118 $0 2012 2013 2014 2015 201
Slide 8: PulteGroup's Business Platform Provides a Strong Competitive Position
PulteGroup’s Business Platform Provides a Strong Competitive Position 8
Slide 9: Broadly Diversified Across the Country
Broadly Diversified Across the Country 2017 Closings West Northeast 20% 6% Southeast 19% Texas 19% Florida 18% Midwest 18% 2017 Revenues 2017 Owned Lots West Northeast Northeast 24% 8% West 6% 29% Southeast Southeast 17% 19% Texas 14% Florida Florida 21% Texas Midwest 18% 15% Midwest 17% 9 12%
Slide 10: With an Unmatched Ability to Serve All Buyer Groups
With an Unmatched Ability to Serve All Buyer Groups 2017 Closings by Buyer Group Active Adult Entry Level 25% 20% First Time 10% Luxury 15% Move Up 30% 10
Slide 11: Supported by a Robust Land Pipeline
Supported by a Lots Under Control Robust Land Pipeline 150,000 Owned Optioned 54,372 43,979 52,158 42,160 120,000 28,266 34,573 90,000 99,279 Pipeline of ~140,000 lots provides 95,212 96,220 95,919 89,253 90,064 consistent access to critical land resources 60,000 30,000 0 2013 2014 2015 2016 2017 Q1
Slide 12: Building Shareholder Value
Building Shareholder Value Growing Our Business While Continuing to Deliver High Returns 12
Slide 13: Looking to Build Scale in Each Market Served
Looking to Build Scale in Each Market Served Grow in existing markets to realize larger scale • Better access to land and trade resources • Greater overhead efficiencies 4 relevant measures of market share • Unit volume/scale • Relative market share (RMS) • Market share (absolute) • Builder ranking
Slide 14: What are Some of the Market Opportunities?
What are Some of the Market Opportunities? PulteGroup Transactions by Consumer Group Ultra Value Entry-Level Move-Up Luxury Ultra Luxury 55+ 100% 80% 60% 40% 20% 0% Market Transactions by Consumer Group Ultra Value Entry-Level Move-Up Luxury Ultra Luxury 55+ 100% 80% 60% 40% 20% 0% 14 14
Slide 15: Expect Modest Shifts in Buyer Mix Over the Next Few Years
Expect Modest Shifts in Buyer Mix Over the Next Few Years Closings by Buyer Group Core of business remains serving move- 32% 2017 Future State up buyers 30% 28% • Group is less price and interest rate sensitive 26% • Spend over $70,000 on high-margin options 24% 22% and lot premiums 20% Aging of mil
Slide 16: Initiatives to Maximize Gross Margin
Initiatives to Maximize Gross Margin Percent of Annual Closings from Margins benefitted from prior initiatives: Common Plans • 12-step design process 90% • Commonly managed plans 80% 79% • Value engineering and should costing 77% 70% • Strategic pricing 67% • Improved product quality 60% 58% 50% Con
Slide 17: Areas of Focus to Achieve Greater Overhead Leverage
Areas of Focus to Achieve Greater Overhead Leverage SG&A % of Revenues (LTM) 12% 11% 11.5% Expect increased overhead leverage 10.5% as revenues grow 10% 9.8% 9% • Opportunity to realize an incremental 9.1% 8% 10-20 basis points of SG&A leverage annually 7% Continue to assess overhead spend 6% 6.4% r
Slide 18: And Improved Asset Efficiency
And Improved Asset Efficiency Inventory Turns Investing in smaller, faster turning projects 1.0 • Potential to enhance returns while lowering risk 0.9 0.94 0.94 0.88 0.8 0.85 0.83 0.7 Approved land deals in 2017 averaged 0.6 125 lots and 2.7 years of supply 0.5 • Continue to expand use of options as
Slide 19: That Can Deliver Increased Cash Flows
That Can Deliver Increased Cash Flows % of Total Shares Outstanding Repurchased Annually Given strong land pipeline, investment growth can moderate 12% 11% • Increasing development spend which recycles 10% 11% faster than acquisition dollars 9% 9% 8% 7% Operations expected to generate $700 6% 6% mil
Slide 20: And Higher Returns on Equity
And Higher Returns on Equity Return on Equity 17% 15% 15.2% 13% 12.7% 11% 9% 10.1% 10.5% 7% 5% 3% 1% -1% 2014 2015 2016 2017 20
Slide 21: Summary
Summary G row ing O urBusiness W hile Continuing to DeliverH igh Returns
Slide 22: Planning to Deliver Growth and High Returns
Planning to Deliver Growth and High Returns Expect 2018 revenue growth of 9% to 19% Maintain disciplined business practices to maximize gross and operating margins Improve overall asset efficiency to enhance cash flow Use strong cash flow to invest in the business and repurchase shares consistent es
Slide 23: Appendix
PPuttesroup APPENDIX
Slide 24: Continue Disciplined Land Investment in Target Markets
Continue Disciplined Land Investment in Target Markets IRR 18% 18% 18% 18% 18% 19% 19% 20% 20% 21% 21% 22% 22% 23% 24% 25% 26% 27% 28% 29% 30% Threshold Score 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Four major categories to determine risk profile 1. Strategic Marketing • Locat
Slide 25: Reconciliation of Non-GAAP Financial Measures (Unaudited)
Reconciliation of Non-GAAP Financial Measures (Unaudited) This report contains information about our operating results reflecting certain adjustments, including adjustments to cost of revenues, selling general, and administrative expenses, income before income taxes, income tax expense, net income,
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