M.D.C. Holdings, Inc.

M.D.C. reported Q3 2023 net income of $107.3 million, or $1.40 per diluted share, down 26% year over year. Home sales revenue was $1.1 billion from 1,968 closings at an average selling price of $552,000, down 6% year over year. Gross margin from home sales was 19.2% versus 22.7% a year ago; excluding inventory impairments, it was 19.7% versus 24.7%. Homebuilding pre-tax income was $127.4 million, down 24% year over year, and financial services pre-tax income was $12.4 million, down 29%. SG&A fell to $101.3 million, and the company recorded $22.9 million of interest income. For Q4 2023, management expects deliveries of 2,200 to 2,400 homes, average selling price of $545,000 to $555,000, gross margin from home sales of 18% to 19.5%, and G&A expenses of $50 million to $55 million. Full-year deliveries at the midpoint would be over 8,100 homes.

Larry Mizel said the quarter showed strong profitability, solid demand, and a balance sheet that supports both investment and an industry-leading dividend. He emphasized that limited existing-home supply, targeted incentives, and a focus on affordable product are helping M.D.C. gain share, while improved cycle times and a stronger land pipeline position the company for the spring selling season and 2024. His tone was constructive and confident, with repeated references to resilience and long-term strength.

Bob Martin focused on the year-over-year margin compression and the drivers behind it: higher incentives, pricing changes, and some construction-cost pressure, offset partly by better SG&A leverage and lower construction costs sequentially. He highlighted liquidity of over $2.9 billion, nearly $1.8 billion in cash and short-term investments, a 31.2% debt-to-capital ratio, and no senior note maturities until January 2030. He also said Q4 incentive levels should rise if mortgage rates stay elevated, while noting G&A should be $50 million to $55 million and the effective tax rate should be roughly 23% for the full year.

Analysts focused on spec inventory levels, incentive intensity, land buying, and whether rising rates would force the company to protect margins more aggressively. Management said total specs were about 2,681, with about 250 finished, and indicated spec levels could rise modestly toward year-end to support spring selling. On land, Bob Martin said most Q3 purchases were finished lots and that high-teens margin could be acceptable for truly finished deals, while David Mandarich said October demand remained healthy and no region stood out as materially worse than others, though affordability-sensitive markets like Phoenix, Orlando, and Las Vegas were mentioned.