Century Communities (CCS) Q3 Earnings call transcript Oct 23, 2024

Century Communities, a leading homebuilder in the United States, reported a robust third quarter performance, positioning the company well for the future. The company's Chairman and Co-CEO, Dale Francescon, highlighted the company's impressive growth, with a 21% increase in community count to a new record of 305 communities and a 25% increase in deliveries of 2,834 homes. These achievements were underpinned by a 29% and 10% growth in home sales revenues, respectively.

Strategic Acquisitions and Market Positioning

Century Communities' strategic acquisitions, including Anglia Homes in Houston, have strengthened its position as a top 5 homebuilder in the Houston market. These acquisitions not only deepen the company's share in existing markets but also increase its access to capital-efficient finished lots. The company is well-positioned to drive delivery growth of 10% or more on an annual basis in the coming years.

Focus on Affordability and Inventory Management

Century Communities' focus on affordable entry-level homes is proving to be a strategic move, especially given the recent decline in mortgage rates. This strategy, combined with the company's approach of building homes on a spec basis, allows for a quick move-in inventory and provides homebuyers with certainty of financing at low market interest rates. The company's homes are primarily built on a spec basis, with nearly 100% of deliveries priced below FHA limits, and over 60% of mortgages closed by its captive mortgage company, Inspire Home Loans, were FHA, USDA, or VA loans.

Financial Performance and Outlook

Century Communities reported a solid financial performance in the third quarter, with pretax income of $109.9 million and net income of $83 million or $2.59 per diluted share. The company's adjusted net income was $87 million or $2.72 per diluted share, and EBITDA was $132.3 million. The company's net homebuilding debt to net capital ratio increased to 32.1% due to the acquisition of Anglia Homes and continued growth in homes under construction. However, the company remains financially sound, with a book value per share of $81.29 and $2.5 billion in stockholders' equity, providing ample flexibility with leverage management.

Market Outlook and Challenges

The housing market continues to face challenges, with mortgage rates seeing some fluctuations. Century Communities remains optimistic about the market, citing healthy demand for affordable new homes and the declining mortgage rates. The company's focus on cost management and efficient operations has helped it navigate these challenges, with continued improvements in cycle times and stable direct construction costs.

Analysts' Perspective

Analysts on the call had several questions regarding the company's strategies, growth prospects, and market positioning. They showed interest in the company's community count growth, sales pace, and incentive programs. Century Communities' management team provided insightful answers, highlighting the company's focus on affordability, market share growth, and strategic acquisitions.

Conclusion

Century Communities' third quarter performance underscores its strong financial health and strategic positioning in the housing market. The company's focus on affordability, strategic acquisitions, and efficient operations have positioned it well for future growth. With a solid financial base and a clear focus on meeting the demand for affordable entry-level homes, Century Communities is well-positioned to navigate market challenges and capitalize on opportunities in the coming years.