Century Communities, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Community and Delivery Growth: Community count increased 21% year-over-year and 15% sequentially to a record 305 communities. Deliveries of 2,834 homes were a third quarter record, up 25% year-over-year.
• Sales Performance: Net new contracts of 2,563 increased by 19% year-over-year. Growth was seen in all regions, with the West up 36%, Texas up 20%, and Century Complete up 17% year-over-year.
• Pricing and Affordability: Average sales price was $394,000, focusing on affordable entry-level homes. Nearly 100% of homes were built on a spec basis.
• Acquisitions: Completed acquisition of Anglia Homes in July, strengthening position in the Houston market.
• Cost Control: Direct construction costs declined sequentially, cycle times improved, and while incentives on closed homes increased, adjusted gross margins were roughly flat.

Segment Performance

• Homebuilding: Third quarter home sales revenues were $1.1 billion, up 29% year-over-year and 10% sequentially. Deliveries of 2,834 homes were a third quarter record, increasing 25% year-over-year and 8% sequentially. Adjusted homebuilding gross margin was 23.6%, roughly in line with prior quarter levels. SG&A as a percentage of home sales revenues declined year-over-year and sequentially.
• Financial Services: Revenues from financial services were $20.1 million in the third quarter, down from the prior year quarter due to a competitive market and mark-to-market adjustment for the servicing portfolio.

Guidance

• Deliveries and Revenues: Increased full year 2024 deliveries guidance to the range of 10,900 to 11,300 homes and home sales revenues to the range of $4.3 billion to $4.4 billion.
• 2025 Outlook: Expect delivery growth of 10% or more annually, driven by increasing market share in existing markets through organic growth and strategic acquisitions.

Risks

• Market and Interest Rate Risks: Impact of mortgage rate changes on buyer behavior and affordability.
• Competition Risks: Competition from private homebuilders and public peers in various markets.
• Land and Cost Risks: Potential impact of land cost inflation and market competition on profit margins.

Question and Answer

• Q: About increase in option lots and split with third party developers A: Rob Francescon stated it's a mix of finished lot option contracts with third party developers, self-development, etc., and it's split evenly.
• Q: Strategy for 10% growth and market share gain A: Dale Francescon said growth is primarily organic, with share expected to be picked up from private homebuilders in existing markets.
• Q: Start numbers and production strategy A: Scott Dixon mentioned Q3 starts were 3,158, and the production strategy involves starting over closings, especially in spec building.
• Q: Incentives and adjusted gross margins A: Scott Dixon said the decline in adjusted gross margin in Q3 was driven by incentives, with land costs stable and Q4 margin expected to be impacted by incentives.
• Q: Impact of Anglia acquisition on closings and gross margin A: Scott Dixon said Anglia had minor impact on closings in Q3, and purchase accounting will affect Q4 and early 2025 gross margins.
• Q: Geographic trends and storm impact A: Rob Francescon said storms in the Southeast had minor impact on sales and closings, with no material damage to homes.
• Q: Lot cost increases and competition in Texas A: Scott Dixon said lot costs are stable in Q4, and the Texas market is competitive but scale helps leverage fixed costs.