XML 19 R2.htm IDEA: XBRL DOCUMENT

Pay vs Performance Disclosure

12 Months Ended

Dec. 31, 2022

USD ($)

Dec. 31, 2021

USD ($)

Dec. 31, 2020

USD ($)

Pay vs Performance Disclosure [Table]

Pay vs Performance [Table Text Block]


													Value of Initial Fixed $100 Investment Based On:
Fiscal Year Ended December 31,	Summary Compensation Table (SCT) Total For PEO 1 (Saville)		Compensation Actually Paid to PEO 1 (Saville)		SCT Total For PEO 2 (Bredow)		Compensation Actually Paid to PEO 2 (Bredow)		Average SCT Total for Non-PEO NEOs		Average Compensation Actually Paid to Non-PEO NEOs		Total Shareholder Return		Peer Group Total Shareholder Return		Net Income (in thousands)		Annual Return on Capital
	(1)		(2)		(1)		(2)		(3)		(2) (3)				(4)				(5)
2022	$	42,887,000	$	16,235,913	$	19,289,010	$	12,737,646	$	8,525,859	$	(3,752,140)	$	121.5	$	136.6	$	1,725,575	40.2	%
2021	$	4,162,400	$	62,621,400					$	1,154,088	$	18,937,729	$	132.0	$	146.4	$	1,236,719	26.7	%
2020	$	4,012,200	$	17,730,200					$	1,114,075	$	4,442,082	$	104.6	$	116.0	$	901,248	22.0	%

Named Executive Officers, Footnote [Text Block]

Paul C. Saville was our principal executive officer (PEO) until May 4, 2022, when he was appointed Executive Chairman of the Board. Eugene J. Bredow has been our PEO since May 4, 2022. In 2022, the additional NEOs were Daniel D. Malzahn, Matthew B. Kelpy and Paul W. Praylo. In 2021 and 2020, the additional NEOs were Messrs. Malzahn, Bredow, Kelpy and Praylo.

Peer Group Issuers, Footnote [Text Block]

The peer group total shareholder return presented represents the cumulative total shareholder return of the Dow Jones US Home Construction Index from December 31, 2019 through and including the last day of each applicable year presented.

PEO Total Compensation Amount

$ 4,162,400

$ 4,012,200

PEO Actually Paid Compensation Amount

62,621,400

17,730,200

Adjustment To PEO Compensation, Footnote [Text Block]

The dollar amounts included in this column represent the amount of "compensation actually paid" as computed in accordance with Item 402(v) of Regulation S-K, and do not reflect the actual compensation earned by or paid to the applicable NEO during the applicable year, given that the substantial majority of this amount relates to unvested stock options which could not have been exercised during the period in which it is included in this measure.

For all periods presented, the amounts deducted from the Summary Compensation Table consisted of the grant-date fair value of equity awards granted in the respective year. The amounts added to the Summary Compensation Table totals consisted of the fair value as of the end of the year of equity grants made in that year, the change in Black-Scholes fair value of unvested equity awards granted in prior years and the change in Black-Scholes fair value of equity awards vesting in the year presented. These amounts for Mr. Saville, and for Mr. Bredow in 2022, are presented in the table below:


Fiscal Year Ended December 31,	Summary Compensation Table (SCT) Total For PEO		Grant date FV reported in the SCT		FV as of end of year of all unvested awards granted during year		Change in FV of awards granted in prior years that are outstanding and unvested		Change in FV of awards granted in prior years that vested during year		Compensation Actually Paid to PEO
2022 - Bredow	$	19,289,010	$	(17,989,042)	$	19,686,588	$	(3,966,542)	$	(4,282,368)	$	12,737,646
2022 - Saville	$	42,887,000	$	(38,952,650)	$	42,628,438	$	(14,582,875)	$	(15,744,000)	$	16,235,913
2021	$	4,162,400	$	—	$	—	$	39,205,875	$	19,253,125	$	62,621,400
2020	$	4,012,200	$	—	$	—	$	9,694,125	$	4,023,875	$	17,730,200

The average of these amounts for the Non-PEO NEOs is presented in the table below:


Fiscal Year Ended December 31,	Average SCT Total for Non-PEO NEOs		Grant date FV reported in the SCT		FV as of end of year of all unvested awards granted during year		Change in FV of awards granted in prior years that are outstanding and unvested		Change in FV of awards granted in prior years that vested during year		Average Compensation Actually Paid to Non-PEO NEOs
2022	$	8,525,859	$	(7,549,732)	$	8,262,384	$	(8,690,934)	$	(4,299,717)	$	(3,752,140)
2021	$	1,154,088	$	—	$	—	$	12,393,203	$	5,390,438	$	18,937,729
2020	$	1,114,075	$	—	$	—	$	2,646,206	$	681,801	$	4,442,082

Non-PEO NEO Average Total Compensation Amount

$ 8,525,859

1,154,088

1,114,075

Non-PEO NEO Average Compensation Actually Paid Amount

$ (3,752,140)

18,937,729

4,442,082

Adjustment to Non-PEO NEO Compensation Footnote [Text Block]


Fiscal Year Ended December 31,	Summary Compensation Table (SCT) Total For PEO		Grant date FV reported in the SCT		FV as of end of year of all unvested awards granted during year		Change in FV of awards granted in prior years that are outstanding and unvested		Change in FV of awards granted in prior years that vested during year		Compensation Actually Paid to PEO
2022 - Bredow	$	19,289,010	$	(17,989,042)	$	19,686,588	$	(3,966,542)	$	(4,282,368)	$	12,737,646
2022 - Saville	$	42,887,000	$	(38,952,650)	$	42,628,438	$	(14,582,875)	$	(15,744,000)	$	16,235,913
2021	$	4,162,400	$	—	$	—	$	39,205,875	$	19,253,125	$	62,621,400
2020	$	4,012,200	$	—	$	—	$	9,694,125	$	4,023,875	$	17,730,200

The average of these amounts for the Non-PEO NEOs is presented in the table below:


Fiscal Year Ended December 31,	Average SCT Total for Non-PEO NEOs		Grant date FV reported in the SCT		FV as of end of year of all unvested awards granted during year		Change in FV of awards granted in prior years that are outstanding and unvested		Change in FV of awards granted in prior years that vested during year		Average Compensation Actually Paid to Non-PEO NEOs
2022	$	8,525,859	$	(7,549,732)	$	8,262,384	$	(8,690,934)	$	(4,299,717)	$	(3,752,140)
2021	$	1,154,088	$	—	$	—	$	12,393,203	$	5,390,438	$	18,937,729
2020	$	1,114,075	$	—	$	—	$	2,646,206	$	681,801	$	4,442,082

Compensation Actually Paid vs. Company Selected Measure [Text Block]

The Relationships Between "Compensation Actually Paid" (1) and NVR Measures of Financial Performance

Background

Homebuilding is a cyclical business with long project life cycles. Our executive compensation program is structured to focus our executives on long-term performance, not short-term quarterly or annual performance. For over 25 years, our compensation philosophy has remained consistent and has focused our management team on long-term maximization of shareholder value, as demonstrated by our 25 year total shareholder return of 20,986%, compared to the S&P 500 Index total shareholder return of 529% during the same period.

In our 1996 proxy statement, when our stock price was under $10 per share, we stated that our executive compensation philosophy “includes performance based compensation which effectively aligns the interests of management with those of the Company’s shareholders. The total compensation package is structured to effectively achieve the mutually beneficial goals of retaining experienced senior executives and aligning senior executive compensation with the creation of long-term shareholder value.” That compensation philosophy remains in place today. The consistency in our compensation philosophy is clear, and so is the alignment with shareholders, as demonstrated by the December 31, 2022 closing price of $4,612.58 per share. This compensation philosophy has also achieved the goal of retaining experienced senior executives, as the average NVR experience of our senior executives is nearly 20 years.

Approximately 85% of our named executive officers' compensation is at risk, and the substantial majority of our named executive officers’ compensation is in the form of stock options with long-term vesting. Our periodic option grants to named executive officers do not begin to vest until the end of the third year following the grant date, and vest 25% each year from that point until the end of the sixth year following the grant date. This vesting schedule is substantially longer than that of our peer group and most companies. 50% of the vesting for our stock option grants is subject to a performance metric, NVR's return on capital relative to our peer group.

The most significant driver of "compensation actually paid" to our NEOs is the change in our stock price from the grant date to the vesting date. We believe this relationship benefits shareholders by motivating our executives to drive long-term increases in shareholder value. Given our long term vesting schedule, grants made in periods as far back as 2017 impact the "compensation actually paid" presented in the table above. As a result, "compensation actually paid" in each individual year presented will be highly variable as it is almost entirely driven by the change in the Black-Scholes value of stock options from the beginning of the year to the end of the year.

Our compensation for all of our executive officers is simple, consisting of:

a.moderate target cash compensation (base salary and an annual incentive bonus capped at 100% of base salary, as described further on page 28);

b.significant long-term equity incentives in the form of stock options granted periodically; and

c.the same personal benefits for which all of our employees are eligible.

Accordingly, our PEO’s "compensation actually paid" is highly correlated to that of the remaining NEOs. In periods where our stock price performs strongly, our PEO and the remaining NEOs will each have higher "compensation actually paid" (as defined in Item 402(v) of Regulation S-K). In periods where our stock price declines, our PEO and the remaining NEOs will have lower "compensation actually paid." We believe this provides 100% alignment between the interests of our named executive officers and our shareholders.

Relationship between "compensation actually paid" and our cumulative TSR

The relationship between "compensation actually paid" and our TSR is simple. "Compensation actually paid" to all of our NEOs is highly correlated to our TSR over the vesting period of our equity grants. For example, in 2021, 93% of the "compensation actually paid" to our PEO and 94% of the "compensation actually paid" to the remaining NEOs was driven by the increase in the Black-Scholes fair value of stock options.

Our long-term vesting and the use of stock options ensures that our NEOs’ long-term interests are aligned with our shareholders’ interests. Our NEOs must drive long-term shareholder value to realize the substantial majority of their compensation. That alignment is demonstrated by the change in our share price over the long-term.

(1) The "compensation actually paid" presented in this section is as computed in accordance with Item 402(v) of Regulation S-K, and does not reflect the actual compensation earned by or paid to the applicable NEO during the applicable year, given that the substantial majority of this amount relates to unvested stock options which could not have been exercised during the period in which it is included in this measure.

Relationship between "compensation actually paid" and net income and return on capital

The other two measures presented in our pay versus performance table are net income and return on capital. We believe that long-term shareholder value is driven in large part by growth in net income. We have grown net income in each of the years presented in the pay versus performance table; however, our "compensation actually paid" has been higher in years where our share price performed well, and lower in years where our share price declined.

With respect to return on capital, the return on capital metric (over a three year performance period) represents our performance metric for vesting of performance-based options, and requires us to outperform the peer group. 50% of the each option grant to our NEOs is subject to the return on capital performance condition, and this component of NEO compensation only vests at the target level if our three year return on capital is in the top 25% of our peer group. We believe return on capital is an important metric for us and our shareholders due to the capital intensive nature of the homebuilding business.

"Compensation actually paid" in any given year does not correlate strongly with the changes in net income or return on capital due to the cyclical nature of the homebuilding industry, and the fact that the substantial majority of compensation is in the form of long-term stock options. Our focus on long-term growth is designed to limit risk and maximize returns in a cyclical industry. Over the three year period, our net income grew by 91% and our return on capital metric was the highest in our peer group. Our goal is to deliver industry leading rates of return and growth in net income (and earnings per share) over the long term, and we believe by focusing on this long-term growth, we will maximize shareholder value.

Relationship between our TSR and the peer group TSR for the three most recently completed fiscal years

The peer group TSR represents the cumulative shareholder return of the Dow Jones US Home Construction Index from December 31, 2019 through and including the last day of each applicable fiscal year presented in the table. During the last three fiscal years, our TSR performance lagged the peer group TSR.

We believe our lot acquisition strategy avoids the risks associated with land ownership and development, which historically has resulted in outperformance during recessionary periods. With the overall strength of the homebuilding industry during the last three years, our TSR performance has been more in line with our peer group than in measurement periods which include a cyclical downturn (like the 2006-2011 housing downturn, where we were the only publicly traded homebuilder that remained profitable). Over the long term, our strategy is the key driver of our strong balance sheet, which over the long term maximizes shareholder value in our cyclical industry, as demonstrated by our 20 year TSR leading the peer group.

Most important financial performance measures to link "compensation actually paid" to our company performance during the last fiscal year

During 2022, the most important financial performance measures to link "compensation actually paid" to our company performance were:

•Total Shareholder Return

•Consolidated Pre-Tax Profit

•New Orders

•1 Year Return on Capital

•Return on Equity

•Diluted Earnings Per Share

Total Shareholder Return Amount

$ 121.5

132.0

104.6