Pultegroup, Inc. · NYSE:PHM
Pultegroup — J.P. Morgan Homebuilding & Building Products Conference 2020
25 slides from Pultegroup's conference presentation, May 19, 2020
Slide 1: JP Morgan Presentation: Building a More Balanced Builder
JP Morgan Presentation Building a More Balanced Builder May 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements This release 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 serve,
Slide 3: Agenda
AGENDA COVID-19 Impacts & Responses Constructing a Different Type of Homebuilder Summary Appendix: Foundation for Success 3
Slide 4: COVID-19 Impacts & Response
COVID-19 Impacts & Response
Slide 5: Company Comments on COVID-19
Company Comments on COVID-19 Efforts to battle COVID-19 pandemic resulted in significant industry-wide slow down in housing demand beginning in mid-March Company implemented a series of operational changes in response Protecting the health and safety of our customers and employees o Employees
Slide 6: Company Comments on COVID-19 (cont’d)
Company Comments on COVID-19 (cont’d) Focused on managing cashflows and overall liquidity Minimizing future cash outflows associated with home construction, land development, land acquisition and general operating costs Working to maximize cash inflows through home closings Ended Q1 with $1.
Slide 7: Company Comments on COVID-19 (cont’d)
Company Comments on COVID-19 (cont’d) May 11, 2020 Update After an initial significant contraction in housing demand, recent sales trends were more encouraging as weekly net new orders went from approximately 140 homes in the last week of March to almost 400 homes in the final full week of April
Slide 8: Constructing a Different Type of Homebuilder
Constructing a Different Type of Homebuilder
Slide 9: Our Strategic Playbook
Our Strategic Playbook •Current PHM Model •Typical Industry Model ROIC over the cycle Financial Focus on volume growth Pretax growth Metrics Revenue growth Risk-adjusted: Land Single hurdle rate higher risk requires higher return Investment regardless of project profile Select cities and work Geogra
Slide 10: Capital Allocation Aligns with Return Focus
Capital Allocation Aligns with Return Focus NEW MODEL 2015 2016 2017 2018 2019 Total Cash Flow from Ops -$338M $68M $663M $1.4B $1.1B $3.2B Total Land Spend $2.3B $2.8B $2.6B $2.6B $3.0B $13.3B Dividend $116M $125M $113M $104M $122M $580M Share Repurchase $434M $600M $910M $295M $274M $2.5B OLD MODE
Slide 11: Aligning Land Investment with Go-to Market Strategy
Aligning Land Investment with Go-to Market Strategy • Land investments creating a •Lots Under Control by Buyer Group more balanced business – Land pipeline points to coming expansion among affordable/ 35% 36% 35% 35% 35% first-time buyers 32% 33% 33% 32% 33% 32% – Core of business remains serving 29
Slide 12: Becoming Land Light(er) and More Efficient
Becoming Land Light(er) and More Efficient •Lots Under Control • Controlled growth of land investment 160,000 • Focus on shorter duration projects 140,000 – Over the past 3 years, average project 120,000 43,979 52,158 60,047 64,903 67,116 size of ~140 lots 100,000 • Increasing use of options 80,000
Slide 13: Through a Disciplined Land Investment Process
Through a Disciplined Land Investment Process 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 • Land investments sourced by divisions but require corporate approval • Consistent und
Slide 14: Leveraging Common Plan Platform
Leveraging Common Plan Platform •% of Deliveries from Commonly Managed Plans • Commonly managed plans – Consumer validated 90% – Optimized for material 85% content and ease of build 80% Target Range 81% 81% – Built across multiple 75% 77% communities and/or markets 70% – Frequency of construction 65
Slide 15: Next Step in Common Plan Strategy
Next Step in Common Plan Strategy • 2020 acquisition of Jacksonville-based Innovative Construction Group – Provides comprehensive framing solutions including design services, manufactured wall panels, roof trusses and floor systems, and on- site installation – Expect ICG to benefit Jacksonville oper
Slide 16: Summary
Summary Working to Deliver High Returns Over the Housing Cycle
Slide 17: Implementing a Different Business to Create Long-term Shareholder Value
Implementing a Different Business to Create Long-term Shareholder Value FOCUS on the customer: deliver superior build quality and home buying experience INVEST in high-returning, shorter duration land positions MAINTAIN disciplined business practices IMPROVE asset efficiency to increase inventory tu
Slide 18: Appendix: Foundation for Success
Appendix Foundation for Success
Slide 19: Broad and Balanced Geographic Footprint
Broad and Balanced Geographic Footprint % for FY 2019 % of Company SEATTLE Closings 15% BOSTON Revenue 15% Lots 11% MINNEAPOLIS DETROIT PHILADELPHIA % of Company CLEVELAND CHICAGO Closings 6% COLUMBUS SAN FRANCISCO WASHINGTON D.C. Revenue 8% INDIANAPOLIS SAN JOSE LOUISVILLE Lots 5% FRESNO RALEIGH LA
Slide 20: Industry Leading Brand Names
Industry Leading Brand Names ©2020 PulteGroup 20
Slide 21: Serving a Variety of Price Points
Serving a Variety of Price Points $500K Under $275K and Above 18% 25% Percentage of 2019 Closings by Price Point 20% 37% $400K–$499K $275K–$399K ©2020 PulteGroup 21
Slide 22: Generating Superior Business and Financial Results
Generating Superior Business and Financial Results • Closings • Homes Sale Revenues ($B) 23,107 23,232 19,951 21,052 $9.8 $9.9 17,127 $8.3 $7.5 $5.8 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 • EPS • Share Repurchases & Dividends ($M) $1,023 $3.55 $3.66 $725 $550 $1.36 $1.75 $1.44 $399 $397 2
Slide 23: Guided by a Strong Corporate Ethic…
Guided by a Strong Corporate Ethic… Certified as a Great Place to Work® company Proven commitment to construction quality and buyer experience PHM stock a component of the Dow Jones Sustainability Index Built to Honor: serving our nation’s wounded veterans • Over 50 mortgage-free homes donated to ve
Slide 24: …And an Independent, Experienced & Diverse Board
…And an Independent, Experienced & Diverse Board Bryce Blair* Thomas Richard Brian Anderson* Chairman, Invitation Folliard* Homes, former Dreiling* Non-Executive Former CFO, Former Chairman and Chairman and CEO, Chairman, former OfficeMax (2005) CEO, Dollar General AvalonBay President and CEO, Commu
Slide 25: Strong Capital Structure Provides Flexibility
Strong Capital Structure Provides Flexibility •Debt Maturities ($M) • Q1 2020 net debt-to-cap 22%; debt-to-cap 38% – In response to COVID-19 $1,000 uncertainties, Company drew $700M on its revolver in Q1 $700 $600 • Early tender for $274 million of 2021 notes $426 completed in 2019 using available c
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