After an unusually public, and still ongoing, battle over the questionable leadership of the homebuilder’s executive team, PulteGroup’s first-quarter earnings on Thursday hold an intense amount of value and potential for scrutiny.
Despite calls on poor company decisions, the earnings show the company faired quite well in the first quarter, beating revenue and earnings per share expectations.
Total revenue hit $1.43 billion, more than $70 million above expectations, while earnings per share hit $0.24, more than $0.04 above expectations.
"PulteGroup has gotten off to a strong start in 2016, with increased investment driving growth in the business as the value of net new orders increased 24% to $2.1 billion and our backlog expanded by 31% to $3.4 billion," said Richard Dugas, chairman and CEO of PulteGroup. "We continued to deliver strong margin performance through our focus on better community locations, strategic pricing and construction efficiencies, while enhancing our overall liquidity and maintaining a superior balance sheet that gives us the flexibility to capitalize on market opportunities as they develop."
"Looking to the broader housing market, we remain pleased with overall demand and expect new home sales will continue to move higher over the coming years as the industry benefits from an improving economy, ongoing employment and wage gains, low interest rates, a limited supply of homes and the gradual release of pent-up demand," added Dugas. "We believe our business is extremely well positioned to be successful in this type of operating environment given our disciplined investment practices and focus on investing in high returning projects."
This is welcomed news for investors, who have recently been bombarded with reports and letters to try and keep them calm in light of the public power struggle.
James Postl, lead independent director for the Board of Directors, issued an open letter to shareholder on April 5 to give a transparent look into what is going on inside the company. Check here for the full letter, which gives a details timeline of events.
The letter starts out:
You may have seen the letter to our Board of Directors that was recently made public by Bill Pulte, who founded PulteGroup in 1950, stepped down as Chairman in August 2009, and currently owns 8.87% of PulteGroup stock. In his letter, he made various allegations and attacks against the Company, its management and its strategy. We wanted to provide our shareholders with the facts relating to recent actions by Mr. Pulte, his grandson and one of our directors, Jim Grosfeld, in their attempt to influence our considered succession planning process and change the strategic direction of PulteGroup. While we have significant respect for Mr. Pulte as the founder of PulteGroup, we believe his campaign is misguided and is not in the best interests of shareholders.
In addition, we want to reassure our shareholders that the Board stands firmly behind the Company's Value Creation strategy, which has produced significantly higher profitability and shareholder returns since Richard Dugas, our CEO, and his team began implementing it in 2011. We also are strongly supportive of our CEO as he continues to execute that plan over the coming year, and as he assists us in the process of identifying the next generation of leadership to continue the Value Creation plan.
Dugas, while supported by the board, still announced amidst all this that he would retire come May 2017 due to disputes with the founder and largest shareholder over the company’s direction.
Dugas, 50, joined the company in 1994 and has served as CEO since 2003, and chairman since 2009. There is currently no named replacement, causing the board put together a search committee to find another CEO.
During the company’s earnings call, many fielded questions congratulated Dugas on the quarter saying “you definitely did a lot better than we were looking for (in reference to the company’s gross margin),” “congrats on the solid quarter” and “nice quarter.”
And when asked about his retirement, Dugas refrained from commenting too much other than to say the search for a new CEO can be a lengthy process, and it is expected that he will stay his announced full term through May 2017.
As this was going on, Board Director James Grosfeld announced his resignation, on April 12, effective immediately.
Grosfeld, along with company founder Bill Pulte and his grandson, held a private meeting with Dugas on March 21 to tell him to step down soon, later insisting that it be by the end of May 2016, or “there would be war.”
Due to these and other actions, the board unanimously (except Grosfield) decided not to nominate Grosfeld as director at the May 2016 Annual Meeting of Shareholders.
