Century Communities Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 23, 2024

There are 12 speakers on the call.

Operator

Greetings. Welcome to Century Communities Third Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

Operator

I will now turn the conference over to Tyler Lanten, Senior Vice President of Investor Relations for Century Communities. Thank you. You may begin.

Speaker 1

Good afternoon. Thank you for joining us today for Century Communities earnings conference call for the Q3 of 2024. Before the call begins, I would like to remind everyone that certain statements made during this call may constitute forward looking statements. These statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in the forward looking statements. Certain of these risks and uncertainties can be found under the heading Risk Factors in the company's latest 10 ks as supplemented by our latest 10 Q and other SEC filings.

Speaker 1

We undertake no duty to update our forward looking statements. Additionally, certain non GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Hosting the call today are Dale Francescon, Chairman and Co Chief Executive Officer Rob Francescon, Co Chief Executive Officer and President and Scott Dixon, Chief Financial Officer. Following today's prepared remarks, we will open up the line for questions.

Speaker 1

With that, I'll turn the call over to Dale.

Speaker 2

Thank you, Tyler. Good afternoon, everyone. We're very pleased with our results in the Q3 2024, which positions us well for the balance of the year 2025 and beyond. Our community count increased 21% year over year and 15% sequentially to a new company record of 305 communities. Deliveries of 2,834 homes were a 3rd quarter record and increased 25% versus the prior year quarter and by 8% quarter over quarter, while our home sales revenues of $1,100,000,000 posted gains of 29% and 10%, respectively.

Speaker 2

Our adjusted homebuilding gross margin of 23.6% was roughly in line with 2nd quarter 2024 levels of 24%, while our SG and A as a percentage of home sales revenues declined by 100 basis points year over year and 50 basis points sequentially as we continue to leverage our fixed costs. Turning to sales, our 3rd quarter net new contracts of 2,563 increased by 19% year over year. We saw growth in all of our regions during the quarter with the West increasing by 36%, Texas by 20% and Century Complete by 17% versus the prior year quarter. Within the quarter, our orders increased sequentially in both August September, while our orders so far in October have moderated from September levels as buyers adjust to the recent increase in mortgage rates. Looking out to the Q4, if typical seasonality holds, we would expect our per community order activity to remain consistent on a sequential basis.

Speaker 2

Our average sales price was $394,000 in the quarter and remains among the lowest of the publicly traded homebuilders. Given this price point and our focus on more affordable entry level homes, we think Century is well positioned to benefit from any future declines in mortgage rates, as lower rates should allow a greater number of people to both qualify for and feel comfortable purchasing a new home. Additionally, nearly 100% of our homes were built on a spec basis in the Q3. And this approach, along with our captive mortgage subsidiary, allows us to maintain an appropriate supply of quick move in homes and provide our homebuyers with certainty of financing at below market interest rates through buy downs. In the Q3, 93% of our deliveries were priced below FHA limits and over 60% of the mortgages closed by our captive mortgage company Inspire Home Loans were FHA, USDA or VA loans that typically carry interest rates and down payment requirements that are below those of conventional mortgages and help make homes more affordable.

Speaker 2

The FICO scores of our homebuyers remain healthy and consistent with levels from the first half twenty twenty four and full year 2023. Before turning the call over to Rob, I want to briefly talk about our growth outlook. At the end of July, we completed our 2nd homebuilder acquisition this year with the acquisition of Anglia Homes, which strengthened our position to a top 5 homebuilder in the Houston market. Similar to our acquisition of Landmark Homes back in January, this deal was consistent with our strategy of deepening our share in existing markets in a land light manner, while also increasing our go forward access to capital efficient finish lots. While we will provide more detailed guidance for our 2025 deliveries with our 4th quarter 2024 earnings.

Speaker 2

Given the growth in our lot count and community count so far this year through both acquisitions and organic growth, starting in 2025, we think we are well positioned to drive delivery growth of 10% or more on an annual basis over the next couple of years. We expect this growth to come from increasing our share within our existing markets and to drive improved margins and returns as we leverage the investments we have made at both the corporate level and throughout our markets at the local level. I'll now turn the call over to Rob to discuss our operations and land position in more detail.

Speaker 3

Thank you, Dale, and good afternoon, everyone. To start, I wanted to provide some further details on the growth that we have seen in our lot and community count that, as Dale mentioned, positions us well for future growth. On the land front, we ended the 3rd quarter with over 80,000 owned and controlled lots, a 17% year over year increase. Our controlled lots increased by 16% on a year over year basis and accounted for 55% of our total lots at the end of the Q3. Texas, the Southeast and Century Complete accounted for 73 percent of our total lot count, the highest percentage in our company's history and reflective of our strategy to grow our presence in these attractive markets that are benefiting from relative affordability, strong employment and population growth.

Speaker 3

Additionally, the strength of our relationships with 3rd party land developers across the Southeast, Texas and in all of Century Complete's markets further supports our landline strategy that is focused on acquiring finished lots. We are also encouraged by the growth in our home starts and community count so far this year, which will support future growth in our deliveries in the quarters ahead. In the Q3, we started 3,141 homes, up 29% from the 2,434 homes we started in the prior year quarter. Year to date, through the end of the third quarter, we started 9,824 homes, an increase of 25% versus the 1st 3 quarters of 2023. We ended the Q3 with a community count of 305, the highest level in our company's history and up 21% on a year over year basis and 15% sequentially.

Speaker 3

Similar to our lot count, Texas, the Southeast and Century Complete accounted for 75% of our total community count, up from 69% in the year ago period. On a sequential basis in the Q3, we added 39 communities with Anglia contributing 26 communities. Given the growth in our community count so far this year, we now expect our year end 2024 community count to be in the range of 310 to 320, which would represent year over year growth of 25% at the midpoint. Turning to costs. We had continued success in controlling our costs in the Q3 with our direct construction costs on homes we started declining by roughly 1% on a sequential basis.

Speaker 3

We have been able to maintain these stable direct construction costs by both leveraging and expanding our trade and supply base across our national footprint. During the Q3, our cycle times continued to improve by about 1 week on a sequential basis and remain in the 4 to 5 months pre COVID levels. As expected, our incentives on closed homes increased in the 3rd quarter to an average of 700 basis points, up from approximately 600 basis points in the 2nd quarter. As we discussed on our Q2 earnings call, our incentives on new orders in the 2nd quarter increased as mortgage rates moved higher, and the higher incentives on these sales flowed through to our deliveries in the 3rd quarter. Our incentives on new orders in the 3rd quarter increased to approximately 800 basis points as we look to maintain an appropriate level of sales in the seasonally slower months of the year.

Speaker 3

While Scott will provide more details on gross margins in his remarks, we are pleased with our performance on the cost side as our adjusted gross margins in the 3rd quarter were roughly flat on a sequential basis despite higher incentives in the 3rd quarter. In closing, I want to highlight that Century recently earned a spot on Newsweek's list of the World's Most Trustworthy Companies 2024, which following news earlier in the year that Century had also been voted the highest ranked homebuilder for the 2nd year in a row on Newsweek's list of America's Most Trustworthy Companies 2024. We could not be more proud of our entire team for building a company culture worthy of this recognition and want to thank all our team members and trade partners that made both these achievements possible. I'll now turn the call over to Scott to discuss our financial results in more detail.

Speaker 4

Thank you, Rob. In the Q3 of 2024, pretax income was $109,900,000 and net income was $83,000,000 or $2.59 per diluted share. Adjusted net income was $87,000,000 or $2.72 per diluted share. EBITDA for the quarter was $132,300,000 and adjusted EBITDA was $137,100,000 Home sales revenues for the Q3 were $1,100,000,000 up 29% versus the prior year quarter on both higher deliveries in average sales price. Our average sales price of 393,800 increased by 3% on a year over year basis and 1% sequentially.

Speaker 4

Our deliveries of 2,834 homes increased by 25% versus the prior year period. We saw growth across all our regions with the West, Mountain, Texas and Century Complete all posting growth rates of over 20%. At quarter end, our backlog of sold homes was 15.80 valued at $671,400,000 with an average price of $424,900 While the average price of our 3rd quarter backlog was above the average sales price of our 3rd quarter deliveries, this difference was largely due to mix, including the percentage of Century Complete Homes. And we continue to expect our average sales price for full year 2024 deliveries to be approximately $390,000 In the Q3, adjusted homebuilding gross margin percentage was 23.6% compared to 24% in the prior quarter. The sequential change was largely driven by a higher level of incentives on closed homes.

Speaker 4

Homebuilding gross margin was 21.7% versus 22.5% in the prior quarter. Additionally, purchase price accounting reduced our Q3 2024 gross margin by 30 basis points versus 10 basis point reduction in the Q2. We expect purchase price accounting to have a similar impact on our homebuilding gross margins in the 4th quarter with the impact trailing off through the first half of twenty twenty five. SG and A as a percent of home sales revenue was 11.9% in the 3rd quarter compared to 12.9%

Speaker 2

in the year ago period.

Speaker 4

We achieved this reduction by controlling our fixed levels of G and A while growing both our deliveries and average sales price. For 2024, we expect our SG and A as a percent of home sales revenue to decline on a year over year basis with further decreases in 2025 as we continue to leverage the investments we have made at both the corporate level and in our divisions that should support the delivery growth we expect over the next couple of years. Revenues from Financial Services were $20,100,000 in the 3rd quarter as compared to $23,600,000 in the prior year quarter. Consistent with last quarter, margins on mortgages originated were impacted by a more competitive market. Additionally, revenues were impacted by a quarterly mark to market adjustment for our servicing portfolio.

Speaker 4

We also continue to make investments in people and systems to support the growth of the business. In the Q3, our tax rate was 24.5% compared to 25.8% in the prior year quarter. We expect our full year tax rate for 2024 to be in the range of 24.5 percent to 25%. Our net homebuilding debt to net capital ratio was 32.1% compared to Q2 2024 levels of 28.1%. The largest driver of this change was our acquisition of Inglia Homes and continued growth in our homes under construction, which increased by 12% on a sequential basis and will support a higher level of deliveries in the Q4 and throughout 2025.

Speaker 4

During the quarter, we maintained our quarterly cash dividend of $0.26 per share. We grew our book value per share to a record $81.29 a 13% year over year increase and ended the quarter with $2,500,000,000 in stockholders' equity. At September 30, to support our growth, we had $605,900,000 in total liquidity. Additionally, we have no senior debt maturities until June of 2027, providing us ample flexibility with our leverage management. Now turning to guidance.

Speaker 4

Given our progress through the 1st 3 quarters of the year, we are increasing our guidance of the full year 2024 deliveries to be in the range of 10,900 to 11,300 homes and our home sales revenue to be in the range of $4,300,000,000 to $4,400,000,000 In closing, demand for affordable new homes remains healthy and the decline in mortgage rates from the highs this past spring has led to some improvements in affordability. We are successfully managing our costs and cycle times and have seen strong growth in our deliveries and community count so far this year, which position us well for further growth in 2025 beyond. With that, I'll open the line for questions. Operator?

Operator

Our first question comes from Carl Reichardt with BTIG. Please go ahead.

Speaker 5

Thanks. Hey, guys. Nice to talk to you. Appreciate the time. So just one quick question on the increase in option lots that's about, let's see, 6,100, I think, or so additional option lots now relative to last year are controlled lots.

Speaker 5

What percentage of those are sort of finished lot option contracts with traditional third party developers, especially related to complete versus option on dirt you're going to self develop eventually put on balance sheet or land bank deal?

Speaker 3

It's really a mix of all of the above, Carl. It wouldn't be predominantly in one of those buckets, but it's really a mix of all of the above.

Speaker 5

So sort of split evenly, generally speaking, is how I should think about it?

Speaker 6

Yes. I

Speaker 4

think that's a good

Speaker 3

way to look at it.

Speaker 5

Okay, great. And then I have a bigger picture question on the long term 10% growth concept strategy and goal. So you're talking about taking market share and obviously with the store count growth you've got near term, if you're growing stores and absorption stay the same faster than the market, then that's a share gain. As you think about it, who do you think you can take market share from? And I think specifically in the markets where you've got a lot of other public peers doing low end stuff, headroom is pretty small there.

Speaker 5

How what is the strategy for actual share gains in those kinds of markets? And do you think there might be, especially based on the lot count, a mix shift away from the west towards Texas and the east as you go? Thanks.

Speaker 2

Well, I think the first place it's going to come from is from the private homebuilders. When we look at the markets that we're in, well, we have a lot of public peer competition. There's a lot of private homebuilders. And as we've seen the private homebuilders are having challenges competing with the publics, both from a standpoint of availability of lending, capital, just a variety of different constraints that they have, reflected by the fact that we've done 2 acquisitions this year of private homebuilders, which allowed us to in Nashville and Houston increase our market share. So I think that's the primary area that we see that we can pick up additional growth.

Speaker 2

And when we look at it, you highlighted our community count growth. So when we look at that and our increased land portfolio that we have in terms of our pipeline, that's really where we see our growth coming from.

Speaker 5

And just to clarify, does the 10% presume additional acquisitions beyond what you've done or is it just all organic as you think about that strategically?

Speaker 2

It's primarily organic. When we look at acquisitions at this point, while we're always looking at different opportunities, it's primarily to increase our share within an existing market. Now with that said, we've done 9 acquisitions over our history as a public company. So we're we would look at opportunities as they come around. But we're very happy with our geographic spread as it currently exists.

Speaker 2

So really our goal is to get deeper in each of our markets and increase the leverage that we get from that.

Speaker 5

Great. Really appreciate the color. Thanks, Alex.

Speaker 6

Thank you. Thank you.

Operator

And the next question comes from Ken Zener with Seaport Research Partners. Please go ahead. Good afternoon, everybody.

Speaker 4

Good afternoon.

Speaker 7

Could you repeat what your start number was, please?

Speaker 4

You're kidding. It's in the low 3000s for the quarter. Exact number we'll grab it here was

Speaker 5

Okay. That's it.

Speaker 4

Yes, it

Speaker 3

was 3,158 and then through the 9 months ending September 30, it was almost 10,000, it was 9,824.

Speaker 7

Okay, great. Thank you. Now related to the strategy of production, the spec building, running above orders, which obviously fills up your inventory, which your closings come from, is that a level of starts versus orders that we've seen in the last two quarters that we should expect to persist over the next, let's say, quarter or 2? Could you give us some guidance there or thoughts as to your starting above orders?

Speaker 4

Yes. Ken, this is Scott. I'll take that one. I mean, generally speaking, as Dale alluded to and we discussed from kind of a longer term perspective with where we're looking from a growth, we generally will be starting, over periods of time in excess of closings and especially as a spec builder, we'll be starting in excess of sales. From quarter to quarter, that certainly that cadence may vary.

Speaker 4

I think the opportunities that we saw throughout this year supported us on a community by community level to start those units and quite frankly put us in a good position to finish out the year and start 2025 strong.

Speaker 7

Excellent. And now I do appreciate your commentary around the incentives, which I think you said were 800 basis points. Could you and I apologize, being new, but could you give us a context for that those incentives, what it was last quarter relative to that 800, and then the split of incentives between, let's say, I assume price reductions and mortgage buy downs? Thank you very much.

Speaker 4

Sure. Absolutely, Ken. So Q2 incentives on orders ran around 700 basis points. Q3 incentives on orders averaged around 800 basis points. Both those quarters generally split approximately fifty-fifty between true kind of mortgage incentives as well as price incentives.

Speaker 4

And that split has been relatively consistent for the last 3 to 4 quarters.

Speaker 7

And

Operator

the next question comes from Alex Rygiel with B. Riley FBR. Please go ahead.

Speaker 8

Quick follow-up on the incentives question. Incentives on orders in the second quarter were up 100 basis points sequentially, yet your reported adjusted gross margin was only down 40 basis points. Was this driven by lower rates later in the quarter? And how might we think about adjusted gross margins as we model it for the Q4?

Speaker 4

Yes. There's a handful of items that obviously are going into the puts and the takes on the gross margin side. So generally speaking, the reduction on adjusted gross margin that you saw quarter over quarter of the 40 basis points was really driven by the incentives. There's some other items in there that offset, but none of them are particularly material from when we step back and look at it. Larger from a little bit more macro perspective, from where we sit currently on the margin front, we feel very stable from a cost perspective.

Speaker 4

Our land costs are have been relatively consistent. Q4, we anticipate land costs to be fairly flat with Q3. We made some commentaries on the direct side in our prepared remarks that we continue to see some incremental savings on the direct side. So really the majority of the driver in the variability in the costs or excuse me, on the margin side will come from incentives. Obviously, not necessarily a one to 1 from a basis point, but those directionally are the main driver.

Speaker 8

That's helpful. And then, I appreciate the longer term kind of growth view of at least 10% deliveries. Anything notable in the new communities that were opened more recently, either in the market they're in, the product that's being sold or maybe the size of the communities themselves?

Speaker 4

No. We've had a focus as a management team to continue to incrementally increase the number of loss per community

Speaker 1

for

Speaker 4

a little bit more run rate, especially on our Century Complete side. We do continue to do that, but nothing from a significant driver from the mix of our communities, from a product of our communities or really from the target consumer that we're going after within any of our markets. So I don't know if there's any specific color or items that I would point out regarding the mix or nature of our communities that are being open period over period.

Speaker 8

And lastly, any notable change in your cancellation rate in the quarter?

Speaker 4

No. Cancellation rate has continued to be very consistent. It's not something that we specifically disclosed, but it is one of the benefits of our spec homebuilding model, especially with our buyer profile to ensure that they understand the timing of the home delivery as well as the financing that they're getting from our captive mortgage subsidiary. And both those items have kept our capture rate at very significantly low levels historically.

Speaker 8

Thank you very much. Nice quarter.

Speaker 4

Absolutely. Thank you.

Operator

The next question comes from Alan Ratner with Zelman and Associates. Please go ahead.

Speaker 9

Hey, guys. Good afternoon. Thanks for the time and in close of the call.

Speaker 4

Hey, Alan.

Speaker 9

Hey. First question, I think it was Dale that mentioned kind of the order pace in October. And I just wanted to clarify, I think what I heard was based on where you're at so far, if the market kind of follows normal seasonality, you would expect absorptions to be, I think you said stable or similar sequentially. I wasn't sure if you were referring to 4Q versus 3Q or just kind of steady through the remainder of the quarter. And then I have a follow on clarification question to that.

Speaker 2

Sure, Chaim. But if that reference was for the quarter as a whole. So in terms of the commentary, yeah, Q4 versus Q3. When we look at it, September was, as I said in my prepared remarks of the 3 months in the quarter was the strongest. We've seen some seasonality in October, coupled with some higher rates that probably had some impact on that as well.

Speaker 2

But when we look the quarter as a whole, we expect absorptions to be similar in Q4 to what we experienced over Q3.

Speaker 9

Okay. That's helpful. So just to put some numbers on this, because it's a little tricky when your community count is kind of rising at the rate it is and I know you had the acquisition mid quarter. So I want to I just want to make sure I'm thinking about it the same way you are. So you ended the quarter with over 300 communities, but your average community count for 3Q is closer to 285 if I take point over point.

Speaker 9

So that's roughly a 3 per month sales pace. So is that what you're guiding for or not guiding, but that's what you're thinking of on the 300 plus communities?

Speaker 2

Yes. I think that makes sense. I mean, when you look at it, the since we count our communities at the end of the quarter and we didn't have Anglia for the entirety of the quarter, you did a bit of a distortion there. The other thing on the increase related to the Anglia acquisition, We look at it of the 26 new communities we picked up, about a third of those are nearing closeout. But even with that, we expect that our Q4 Indian community count will still be above what we had at the end of Q3.

Speaker 9

Great. Very helpful. Thank you for the clarification there. And then if I can ask another one, just kind of geographic trends, what you're seeing, obviously, you're pretty diversified from a geographic standpoint, a lot going on. You had the storms in the Southeast.

Speaker 9

I didn't really hear you bring that up at all in terms of any potential impact there. But any kind of winners and losers worth highlighting across your footprint and any impact from the storms either on orders, closings, margin, etcetera in the Q4?

Speaker 3

So relating to the storms, Alan, from a closing perspective, we really didn't lose that many closings, generally speaking, from the storms. It probably slowed down slightly what our sales were toward the end there of the quarter. But again, nothing material by any means. So all in all, from our standpoint, it really wasn't a negative effect. Thankfully, from a personnel standpoint, all of our employees were safe.

Speaker 3

We didn't have any damage, any material damage to any houses and the way the homes are built now in those areas today, the way they're raised up, they're out of the floodplain. So it's really generally the older homes that are having the issues and how the newer homes are built. So ours fared very well. So when I look at it that way, it really wasn't that big of an impact to us.

Speaker 9

Great. Good to hear. Thanks a lot.

Operator

The next question comes from Jay McCanless with Wedbush Securities. Please go ahead.

Speaker 10

Hey, thanks for taking my questions. I guess the first one, could you guys disclose either on a unit basis or dollar basis, what Anglia contributed for closings or closing revenue in 3Q?

Speaker 4

Sorry, Gabe, was that specific to Anglia?

Speaker 10

Yes, to Anglia. What they contribute to either closings or closing revenue for the quarter?

Speaker 4

Yes, they were relatively small impacts from a delivery perspective, less than 2%. Again, the timing of the acquisition of Anglia and us working through transition, we've got system conversions and full integration will be done by the end of this month. So for the quarter itself, it is a relatively minor driver on the closing front.

Speaker 10

And then Scott, you were talking about the puts and takes on gross margin. What type of impact, if any, should we expect from purchase accounting in 4Q, 1Q with the Anglia deal?

Speaker 4

Yes, great question because there will be a drag as we move forward in Q4 as well as into early 2025. So Q3 itself was 30 basis points. I would expect that to be 30 to 50 basis points potentially in Q4, maybe the same in Q1 and then starting to trail itself off in Q2 of next year as we work through all those

Speaker 6

units. All

Speaker 10

right. That's helpful. And then the other question I had, just maybe also one more question on Anglia. Could you maybe talk about what type of annual closings they had in 'twenty three or 'twenty two? Just give us a sense of what the run rate for that business could be?

Speaker 2

Yes. I mean, there when you look at them, they were in business for quite some time in the Houston market as a private builder. Consistently, they were doing between 4500 closings a year. Interesting, their business model was focused on buying finished lots. They didn't develop their own lots.

Speaker 2

And they were primarily either buying them from developers on a standalone basis or in master plan communities. That was part of the appeal from our standpoint is we got a fairly robust pipeline of additional lots. And then the controlled lots are ones that are coming to us in a finished nature. So from our standpoint, it allowed us to get deeper in Houston, which is a market that we like on a long term basis And to be able to pick up a pipeline of finished lots and not have to do development on an ongoing basis is something that we looked as a very positive addition to our operation there.

Speaker 10

And sorry, I did have one more question. So net debt to cap has moved from, call it, 29% at year end 'twenty three to over 38% now. Is this the max we should expect near term or maybe talk to us about where the upper bound is on that? And should we see that start to work down over time as you move through some of these assets, both Landmark and Anglia that you've acquired?

Speaker 4

Yes. Jay, this is Scott. Really consistent kind of thought process from our perspective on the leverage. We've always said in that 30% to 35% range is something that we would be comfortable doing, but that we likely would end up working it down. I think you'll see as we monetize, especially Anglia and some of the other investments that we have done during the quarter from a whip perspective, that as we finish the cash cycle, from a homebuilding perspective that, that net debt to cap likely comes down by year end.

Speaker 4

Okay, great. Thanks everyone. Thanks. And

Operator

the next question comes from Michael Rehaut with JPMorgan. Please go ahead.

Speaker 11

Hi everyone. This is Andrew Ozzie on for Mike. I appreciate you taking the question. I really appreciate those long term targets you put out. I would love to hear any assumptions or thoughts you have towards potential lot cost increases into next year?

Speaker 4

It's a little early to fully dial that in for all of next year. Especially on our Century Complete side, we're still able to identify contract for finished lots that can be incremental into next year's closings. I can tell you that we're from the immediate future into Q4, fairly consistent and stable from a lot cost perspective. That looks like it will remain in the early Q1. And then generally speaking, we would anticipate what I would call normal cost inflation on the land side as we start to get into the back half of 'twenty five.

Speaker 11

Got it. I really appreciate that. And then with you guys getting more into Houston and just kind of the how people are viewing Texas and Florida right now in terms of the uptick in inventory, I'm just curious you've been seeing any increased competition on your side in your specific markets?

Speaker 2

Well, Texas in general has always been a competitive market. There's a lot of public peer competition that's there. One of the advantages that we look at is being larger in Houston, for example. It's a very large market on its own. Having more scale there allows us to leverage some of our fixed costs.

Speaker 2

And so when we look at that, we see it as just being a net positive for us. But it's just there's a lot of positives about the Texas market. It gets competitive from time to time and in today's world, it's a bit competitive. When we look at Florida, we don't have a tremendous exposure to Florida. I think we've got about 10% of our closings are coming out of Florida between our two brands.

Speaker 2

Our Century Communities brand is in Jacksonville and Century Complete is spread throughout the state. So when we look at that, there's certain areas that we see that are softer than others. And we look at Jacksonville where we probably have the largest concentration since we have both Century Communities and Century Complete, that seems to be holding up fairly well for

Speaker 11

us. Thank you a lot for all that color. I'll pass it on.

Speaker 6

Thank you.

Operator

The next question comes from Alex Barron with Housing Research Center. Please go ahead.

Speaker 6

Yes. Thank you, gentlemen. Yes, I wanted to focus on Anglissie Homes, given that it's a fairly sizable number of communities. Do they continue to operate their current product strategy etcetera or do you guys even with something like that change it to make it more like the way you guys operate or is it like a phased transition, if you will? What would we expect there?

Speaker 3

Yes. It's a phased transition, but we will utilize our product library going forward. But it's a phased transition depending on how much runway is left in a particular community, whether it makes sense to go in and change the product now or just wait for new communities.

Speaker 6

Okay. So basically as some sell out, the new ones would be more along the lines of the way you guys operate?

Speaker 2

Yes.

Speaker 3

Yes. Okay. But their and that's truly just a product thing, Alex, and the value engineering we have in our plans and the efficiency, but and consumer acceptance. But when you look at it, their business model was very similar to our entry level business model. And then buying, as Dale mentioned, only finished lots, it just was a really great fit for us.

Speaker 6

Right. And in terms of sales pace, would you expect the sales pace they had been running at to be similar or do you guys have something you would do differently to increase it?

Speaker 3

Well, we always hope to increase sales pace. But I think for right now, I think we would just say it would be potentially similar.

Speaker 6

Okay, great. Well, thank you and best of luck.

Speaker 4

Thank you. Thank

Speaker 5

you. This concludes our

Operator

question and answer session. I would like to turn the conference back over to Dale for any

Speaker 6

closing remarks.

Speaker 2

To everyone on the call, thank you for your time today and interest in Century Communities. We're very pleased with the solid growth we've seen this year and excited by our outlook for the balance of the year, 2025 and beyond. We look forward to speaking with you again at the beginning of next year.

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Key Takeaways

  • Century delivered a record 2,834 homes in Q3, up 25% y/y, generating $1.1 billion in home sales revenue (+29% y/y) and maintaining an adjusted homebuilding gross margin of 23.6%.
  • Net new contracts rose 19% y/y to 2,563, driven by all regions, with an average sales price of $394K and nearly 100% spec-built homes supported by its captive mortgage subsidiary.
  • The company ended Q3 with a record 305 communities and over 80,000 owned and controlled lots (+17% y/y), bolstered by the acquisitions of Anglia and Landmark Homes, positioning it for ≥10% annual delivery growth starting in 2025.
  • Direct construction costs declined ~1% sequentially and cycle times improved to pre-COVID levels, while higher incentives (800 bps on new orders) kept adjusted gross margins stable Q/Q.
  • Century reported Q3 net income of $83 million ($2.59 EPS) and raised full-year 2024 delivery guidance to 10,900–11,300 homes with home sales revenue now expected at $4.3–$4.4 billion, supported by strong liquidity and a 32% net debt-to-capital ratio.
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Earnings Conference Call
Century Communities Q3 2024
00:00 / 00:00