Pultegroup, Inc. · NYSE:PHM
Pultegroup — J.P. Morgan Homebuilding & Building Products Conference 2015
31 slides from Pultegroup's conference presentation, May 19, 2015
Slide 1: PulteGroup Investor Presentation May 2015
PulteGroup Investor Presentation May 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 • Sustained Recovery of U.S. Housing • PulteGroup 9 Company Profile and Strategic Focus 9 Leveraging Brand Strengths • Aligning Capital Allocation with Value Creation Strategy 2
Slide 4: Positive Housing Demand Dynamics
Positive Housing Demand Dynamics
Slide 5: Housing Recovery Continues into Year 4
Housing Recovery Continues into Year 4 NEW HOME SALES (000) 1,400 • 2014 sales of 437,000 up 43% from 2011 trough, but still well 1,200 below historic average • Factors continue to support 1,000 sustained growth in housing demand 800 9 Favorable demographics 50 Year Avg and pent-up demand 600 9 Low
Slide 6: Pent-up Demand Starting to Break Free
Pent-up Demand Starting to Break Free NUMBER OF SHARED HOUSEHOLDS YEAR-OVER-YEAR CHANGE IN # OF (millions) HOUSEHOLDS (millions) 24 1.0 0.9 23 0.8 22 0.7 0.6 21 0.5 20 0.4 19 0.3 0.2 18 0.1 17 0.0 2007 2014 2008 2009 2010 2011 2012 2013 2014 5
Slide 7: Supply of New Homes Remains in Balance
Supply of New Homes Remains in Balance Completed Unsold New Homes for Sale 250 16 Completed New Homes for Sale (000) Completed Months Supply 14 200 12 Months Supply 150 10 8 100 6 4 50 2 0 0 Source: U.S. Census 6
Slide 8: Building on Operational Strengths to Deliver Improved Financial Performance
Building on Operational Strengths to Deliver Improved Financial Performance
Slide 9: PulteGroup Overview
PulteGroup Overview • Among the nation’s largest homebuilders with operations in Q1 2015 Closings by Brand 50 major metro markets • Delivered over 640,000 homes since being founded in Michigan 30% 25% in 1950 • Unique multi-brand strategy • to serve all major customer 45% • groups • Unmatched presen
Slide 10: Diversified Homebuilding Operations
Diversified Homebuilding Operations 27% 41% 32% 9 9
Slide 11: Focused on Delivering Consistent, Above-Average Returns Over the Long-Term
Focused on Delivering Consistent, Above-Average Returns Over the Long-Term High Big bets with Long-term big bets, With this position, we must: near-term realization high volatility likely • Recognize the industry is cyclical • Maintain or grow Risk competitive position appetite • Focus on consistent
Slide 12: Operational Improvement
Operational Improvement • In late 2010, PulteGroup introduced Value Creation (VC) 9 Long-term shareholder value to be primary metric for measuring success • Goal of VC: deliver better ROIC in any housing environment and deliver top quartile TSR over time 9 Focus on margin, SG&A leverage, and asset t
Slide 13: Realizing a Sharp Increase in Profitability
Realizing a Sharp Increase in Profitability Pretax Income (Loss) ($ millions) $800 $600 $690 $400 $528 $200 $184 $0 -$200 -$310 -$400 2011 2011 2012 2012 2013 2013 2014 2014 Closings 15,275 16,505 17,766 17,196 Gross Margin 12.8% 15.8% 20.5% 23.3% SG&A % of 102.6% 71.6% 51.0% 50.6% Gross Margin Turn
Slide 14: While Instilling Capital Focus and Discipline
While Instilling Capital Focus and Discipline • 2014 land investment of $1.8 billion LOTS UNDER CONTROL 9 Authorized 2015 land investment of $2.4 billion, if high returning projects can be identified 9 Increasing use of options which can support better returns while lowering risk • Retired $246 mill
Slide 15: Leveraging Our Unique Brand Opportunities
Leveraging Our Unique Brand Opportunities 14
Slide 16: Current Composition of Our Business
Current Composition of Our Business 25% 45% 30% 2014 Closings 15
Slide 17: Shift in Business Consistent with Demand Environment
Shift in Business Consistent with Demand Environment Community Count by Brand • Initial phase of the housing 900 Centex Pulte Homes Del Webb recovery built on move-up demand 9 Buyer had the life stage need and 800 financial capacity 700 152 9 Higher margins drive superior relative returns even at mo
Slide 18: Business Strategy
Business Strategy • Long-term opportunity, but near-term headwinds: 9Lack of jobs/higher wage jobs 9Increased student loan debt 9Constrained mortgage availability • Sustained buyer demand focused on closer-in communities • Centex ASP of $208,000 targets the higher end of the category • Absorption pa
Slide 19: Business Strategy
Business Strategy • Investing in projects that can generate acceptable returns 9 Focus on closer-in communities; not betting on outlying, albeit lower cost, land positions • Areas of investment focus: Texas, the Midwest, Florida, the Carolinas and California • Ongoing work to lower overall product c
Slide 20: Sustained Strength of the Move-Up Buyer
Sustained Strength of the Move-Up Buyer • Buyer group has driven the first leg of the housing recovery and currently accounts for majority of housing demand 9 Higher likelihood of children and need for more space 9 Financially capable and benefitting from recovery in stock market 9 Greater access to
Slide 21: Business Strategy
Business Strategy • Experienced multiyear strength as buyer group has realized better wage growth and credit availability • Over past 3 years majority of land investment allocated to Pulte Homes 9 Prior period investment will result in ongoing mix shift toward the move-up buyer in the future • Avera
Slide 22: 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 9 Financially the most capable home buyers with 43% of Del Webb 72,000
Slide 23: Business Strategy
Carolina Arbors in North Carolina Business Strategy • Legacy investment in large, highly amenitized Del Webb communities 9 Continue to work down investment and redeploy capital to other opportunities 9 Owned Webb lots total 37,000, down from 47,000 as of 12/31/11 • Company’s highest gross margins, s
Slide 24: 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 9 Potential to offer smaller, non-age New Opportunity restricted communities 9 Focus on product with “lite” or no 33% amenity package 3
Slide 25: Allocating Capital in Support of Value Creation
Allocating Capital in Support of Value Creation 24
Slide 26: 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 should target long-term long-term market growth (population growth plus housing inflation) growth • Going i
Slide 27: Priority #2: Our Dividend Policy
Priority #2: Our Dividend Policy • The Company has historically paid a modest dividend • 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 9 Endeavor to
Slide 28: 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: 9 Provide depth/fill a production gap in markets where we operate today 9 Offer an opportunity to access attractive marke
Slide 29: 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 $120 business, including: investment in the business; $100 dividends; and acquisition opportunities $80 9Consider macro market conditions, project
Slide 30: 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 9 Deliver superior operating results 9 Capture greater construction efficienc
Slide 31: We Build Consumer Inspired Homes and Communities to Make Lives Better
We Build Consumer Inspired Homes and Communities to Make Lives Better 30
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