Slide 1: PulteGroup Investor Presentation December 2015
PulteGroup Investor Presentation December 2015
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: Presentation Agenda
Presentation Agenda • PulteGroup Company Profile and Strategic Focus Review of macro conditions • Land Strategy • Serving Distinct Buyer Groups • Capital Allocation Aligned with Value Creation 2 2
Slide 4: PulteGroup Overview
PulteGroup Overview • Among the nation’s largest homebuilders with operations in approximately 50 major metro markets • Delivered over 640,000 homes since being founded in 1950 • Unique multi-brand strategy to serve all major customer groups • Unmatched presence in active adult market through Del We
Slide 5: Serving the Country's Top Metro Markets
Serving the Country’s Top Metro Markets 27% 41% 32% 4
Slide 6: Diversified Customer Base
Diversified Customer Base 24% 48% 28% First Nine Months 2015 Closings 5
Slide 7: Housing Recovery Remains on Track
Housing Recovery Remains on Track NEW HOME SALES (000) 1,400 • Oct 2015 SAAR of 495K still well below historic average 1,200 • Factors continue to support sustained growth in housing 1,000 demand Favorable demographics 800 and pent-up demand 50 Year Avg Low inventory of new and 600 existing home
Slide 8: Supports for Sustained Growth in Demand
Supports for Sustained Growth in Demand Share of Children Ages 18 - 34 U.S. Household Estimates Still Living With Parents (millions) 32% 119 118 31% 117 30% 116 29% 115 28% 114 113 27% 112 26% 111 25% 110 24% 109 2007 2014 2009 2010 2011 2012 2013 2014 2015 7 7
Slide 9: Land Strategy
Beuttecrour Land Strategy Peuttecroup 8
Slide 10: Land Investment Reflective of Demand Environment
Land Investment Reflective of Demand Environment Community Count and Land Spend ($ millions) 800 $2,500 • Land investment weighed toward Pulte Homes Del Webb serving move-up homebuyers Centex Land Spend 700 through Pulte branded communities $2,000 600 • Harvesting prior investment in 241 201 107 lar
Slide 11: Analysis of Lots by Brand
Analysis of Lots by Brand • Owned lots down 18%; optioned lots up almost 200% • Total lots under control up less than 5% to 137,000 • Reflecting stronger demand among move-up buyers, Pulte lots up 46%, while Centex and Del Webb lots down a combined 19% • Owned Del Webb lots reduced by 20%, or almost
Slide 12: Breaking Down the Del Webb Land Portfolio
Breaking Down the Del Webb Land Portfolio As of September 30, 2015 Older Communities (opened prior to 2012) Newer Communities (opened after 2012) GM% (YTD Sep 2015) * 28.7% GM% (YTD Sep 2015) * 31.7% Average community size at start (lots) ~ 2,000 Average community size at start (lots) ~ 600 Remainin
Slide 13: Serving Distinct Homebuyer Groups
Serving Distinct Homebuyer Groups 12
Slide 14: First-Time Buyer Strategy
First-Time Buyer Strategy • Potentially a long-term opportunity, but headwinds remain Lack of jobs/higher wage jobs Increased student loan debt Constrained mortgage availability • Sustained buyer demand realized in closer-in communities • Centex Q3 2015 ASP of $219,000 targets the higher end o
Slide 15: First-Time Buyer Strategy
First-Time Buyer Strategy • Investing in entry level projects that generate acceptable returns Not targeting the bottom of the buyer range as Centex ASP $219,000 Focus on closer-in communities; not betting on outlying, albeit lower cost, land positions • Areas of investment focus: Texas, the Mid
Slide 16: First-Time Buyer Strategy
First-Time Buyer Strategy • Serving first-time buyers looking for a more urban location Older Millennials seeking closer-in Georgia locations and willing to accept attached product Better financial profile with greater access to mortgage market than entry-level buyer • Entitlement/development is
Slide 17: Sustained Strength of the Move-Up Buyer
Sustained Strength of the Move-Up Buyer • Move-up buyers have driven the first leg of the housing recovery and currently accounts for majority of housing demand Higher likelihood of children and need for more space Financially capable and benefitting from recovery in stock market Greater acces
Slide 18: Business Strategy
Business Strategy • Experienced multiyear strength as buyer group has realized better wage growth and credit availability • Over past 3 years majority of our land investment allocated to Pulte Homes Prior period investment will result in ongoing mix shift toward the move-up buyer in the future • A
Slide 19: Continued Growth of the Active Adult Market
Continued Growth of the Active Adult Market U.S. Population Age 55 to 74 (in millions) 80,000 • 76 million baby boomers; 50% between the ages of 50 to 58 78,000 • Considered the wealthiest 76,000 generation in the country 74,000 Financially the most capable home buyers with 43% of Del Webb 72,000
Slide 20: Business Strategy
Carolina Arbors in North Carolina Business Strategy • Legacy investment in large, highly amenitized Del Webb communities Continue to work down investment and redeploy capital to other opportunities 36,000 owned Del Webb lots as of Q3 2015, down from 47,000 as of 12/31/11 • Company’s highest gros
Slide 21: Expanding Penetration of Active Adult Market
Expanding Penetration of Active Adult Market Interest in Age Restricted Lifestyle • Assessing opportunities to expand Communities penetration of active adult market Potential to offer smaller, non-age restricted New communities Opportunity Focus on product with “lite” or no amenity package 33%
Slide 22: Capital Allocation Aligned with Value Creation
Capital Allocation Aligned with Value Creation 21
Slide 23: Priority #1: Invest in Core Business to Maintain or Grow Relative Market Share
Priority #1: Invest in Core Business to Maintain or Grow Relative Market Share Amount will fluctuate with market Reinvest a percentage of net income assuming • Through cycle average investment targeting long-term long-term market growth (population growth plus housing inflation) growth • Going into
Slide 24: Priority #2: Our Dividend Policy
Priority #2: Our Dividend Policy • Research indicates companies paying a larger dividend realize higher P/E multiples as long as the dividend is deemed sustainable • We ultimately target a dividend equivalent to ~2.0% to 3.0% yield Endeavor to maintain sufficient liquidity to continue funding our
Slide 25: Priority #3: Opportunistic M&A
Priority #3: Opportunistic M&A • Continue to evaluate available opportunities as land transactions – we will not chase growth for growth’s sake • Interested in transactions that: Provide depth/fill a production gap in markets where we operate today Offer an opportunity to access attractive marke
Slide 26: Priority #4: Routinely Return Excess Capital to Shareholders via Share Buybacks
Priority #4: Routinely Return Excess Capital to Shareholders via Share Buybacks Share Repurchase ($ millions) • Continually evaluate capital needs of the $250 business, including: investment in the business; $200 dividends; and acquisition opportunities $150 Consider macro market conditions, projec
Slide 27: In Summary
In Summary • Articulated strategy focused on long-term success • Unmatched ability to serve all major buyer groups • Value Creation strategy goal to deliver better ROIC over the housing cycle and top quartile TSR over time • Return excess capital to shareholders 26
Slide 28: We Build Consumer Inspired Homes and Communities to Make Lives Better
We Build Consumer Inspired Homes and Communities to Make Lives Better 27