What Century Communities (CCS) Said on Its Q3 Earnings Call

Century Communities NYSE: CCS reported lower third-quarter deliveries and margin pressure as rising mortgage rates, inflation and weaker consumer confidence slowed homebuyer demand, particularly among first-time buyers. The company also reduced its full-year delivery and revenue outlook while highlighting cost controls, an expanding community base and its acquisition of Dallas-Fort Worth builder HistoryMaker Homes.

Executive Chairman Dale Francescon said the quarter was marked by a significant increase in interest rates and continuing macroeconomic uncertainty. Buyers became more cautious and less inclined to transact as the quarter progressed, which reduced traffic conversion and orders, he said. Those trends continued into October.

“Despite these pressures, we continue to make good progress on the operational side of the business during the third quarter,” Dale Francescon said, citing growth in the company’s community count and reductions in direct construction costs, finished lot costs and fixed general and administrative expenses excluding advertising.

Third-Quarter Results and Margin Pressure

Century Communities reported third-quarter pretax income of $16 million and adjusted pretax income of $39 million. Net income was $13 million, or $0.44 per diluted share. Adjusted net income, excluding inventory impairment charges and abandonment of lot option contracts, was $29 million, or $1.01 per diluted share.

Home sales revenue totaled $842 million, while the average selling price was $345,000. The company delivered 2,442 homes, down 3% from the prior quarter and 2% from a year earlier. Management said its increased community count largely offset lower absorption rates.

GAAP homebuilding gross margin was 15%. Excluding $19.6 million in inventory impairments, homebuilding gross margin was 17.3%, while adjusted homebuilding gross margin was 19.3%, down 70 basis points sequentially. Chief Financial Officer Scott Dixon said higher incentives were the primary driver of the decline.

The impairments related to pricing decisions at six underperforming communities with less than a year of remaining inventory in the Bay Area, Houston and Florida South markets. The company increased absorption rates in those communities to recycle capital, Dixon said.

Incentives on third-quarter deliveries averaged about 1,300 basis points, compared with 1,200 basis points in the second quarter. Management expects incentives on fourth-quarter closings to rise another 200 to 250 basis points from third-quarter levels as it seeks to support sales pace amid elevated mortgage rates and year-end competition among builders.

Dixon said incentives have generally been split about 60% toward pricing and 40% toward mortgage-related support over the past six to eight quarters. He said the fourth-quarter mix could shift somewhat more toward mortgage assistance because of higher rates.

Community Growth, Century Complete and Land Strategy

Net orders totaled 2,284 homes during the quarter. Chief Executive Officer Rob Francescon said orders followed typical seasonal patterns in July and August, but September demand weakened after mortgage rates rose by about 75 basis points. The cancellation rate remained relatively low at 14.6%.

The company ended the quarter with a record 343 active communities, up 7% year over year and 4% sequentially. Century Communities expects to finish 2026 with 360 to 370 communities, including 29 communities contributed by HistoryMaker Homes.

Century Complete, the company’s entry-level platform, accounted for 38% of third-quarter deliveries. Its community count rose 9% both sequentially and year over year to 122 communities. Management said Century Complete has held up relatively well because it operates more in secondary locations and tends to compete against used-home resales rather than large public homebuilders.

Century Complete also benefits from a fully equipped entry-level offering without options or upgrades, Dixon said. Management added that the platform’s Midwest exposure has performed well relative to some other regions.

Direct construction costs declined 2% sequentially, and finished lot costs fell 3%. However, Rob Francescon said direct-cost savings could begin to level off because of energy costs and tighter trade labor conditions related to heightened immigration enforcement. Cycle times averaged 118 calendar days.

Century Communities reduced starts by 8% year over year and 12% sequentially to 2,502 homes, matching production more closely to demand. It ended the quarter with just over 60,000 owned and controlled lots. Owned lots declined 8% from a year earlier, while controlled lots increased 7%.

The company had more than 27,000 option lots supported by deposits totaling $85 million, or about 3% of equity. Management said it uses land-banking arrangements only on a limited basis and does not cross-collateralize deals.

HistoryMaker Acquisition Expands Dallas Presence

In early October, Century Communities acquired HistoryMaker Homes, a Dallas-Fort Worth-focused builder serving entry-level and move-up buyers. The acquisition was funded with proceeds from Century Communities’ revolving credit facility, Rob Francescon said.

The deal increases Century’s Dallas division from 12 to 41 active communities as of Sept. 30 and raises its last-12-month delivery volume in the market to 669 homes from 211 homes. Century Communities also will maintain a contractual relationship with HistoryMaker’s sister land-development company, which was not acquired, for additional Dallas-Fort Worth land opportunities.

Management said the acquisition fits its strategy of pursuing bolt-on deals in existing markets to increase local scale, leverage overhead and strengthen land resources. Rob Francescon said the company has completed 10 acquisitions since becoming public in 2014.

He also said Century Communities is increasing its move-up exposure not only in Dallas-Fort Worth but across its portfolio. HistoryMaker and an earlier Houston acquisition, Anglia, added move-up product exposure, according to management.

Guidance, Liquidity and Capital Allocation

Century Communities lowered its full-year 2026 outlook. The company now expects deliveries of 9,350 to 9,650 homes and home sales revenue of $3.3 billion to $3.4 billion. The outlook includes approximately 100 deliveries from HistoryMaker.

SG&A represented 14.1% of home sales revenue in the third quarter. The company expects the measure to be roughly 14.5% for the full year and 14% in the fourth quarter, based on the midpoint of its revenue outlook. Management said fixed G&A would represent about 70% of total SG&A at the midpoint of its full-year forecasts.

The company ended the quarter with $2.6 billion in stockholders’ equity and $864 million in liquidity. Net homebuilding debt to net capital was 34.9%, while homebuilding debt to capital was 36.8%.

Century Communities amended its revolving credit facility during the quarter, raising capacity to $1.2 billion from $1 billion and extending its maturity to November 2030. It maintained its quarterly dividend at $0.32 per share and repurchased 170,000 shares for $12 million during the quarter.

Management said capital allocation will prioritize ample liquidity and maintaining debt to capital at or below current levels. Share repurchases may continue opportunistically, but Rob Francescon said the company expects to focus on reducing its debt level over the next several quarters.

About Century Communities (NYSE:CCS)

Century Communities, Inc NYSE: CCS is a residential homebuilder that designs, develops and constructs single-family detached and attached homes for a range of homebuyers, including first-time, move-up and active-adult buyers. The company sells homes under the Century Communities and Century Complete brands, offering a variety of floor plans, home features and community amenities.

Founded in 2000 and headquartered in Denver, Colorado, Century Communities operates in numerous housing markets across the Western, Southern and Southeastern United States.

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