Century Communities, Inc. (NYSE: CCS), a top 10 national homebuilder, announced financial results for its third quarter ended September 30, 2022.
Third Quarter 2022 Highlights Compared to Third Quarter 2021
- Net income increased 27% to $144.5 million or $4.44 per diluted share, both third quarter records
- Pre-tax income improved 18% to a third quarter record $172.1 million
- Total revenues increased 19% to a third quarter record $1.1 billion
- Return on equity improved by 270 basis points to 33.2%
- Deliveries of 2,630 homes, a 13% increase and third quarter record
- Net new home contracts of 1,318
- Homebuilding gross margin of 24.8%
- Adjusted homebuilding gross margin of 26.0%
- EBITDA increased 16% to $188.7 million, a third quarter record
- Homes in backlog of 3,455 homes valued at $1.4 billion
- Selling communities increased 17% to 217 from 186 communities
“We delivered strong results in the third quarter, reporting record third quarter earnings per share, net income and pre-tax income while generating a return on equity of 33.2%,” said Dale Francescon, Chairman and Co-Chief Executive Officer. “While rising interest rates and overall economic uncertainty have weighed on new home sales for the entire industry, we are encouraged by the fact that we are continuing to see demand for homes with near-term completions. We are matching our starts with sales, adjusting our product offering towards even more affordably priced homes, and taking steps to reduce costs. Given the flexibility of our operating model, we believe that Century is well positioned to navigate these near-term challenges.”
Rob Francescon, Co-Chief Executive Officer and President, said, “The flexibility of our operating model allowed us to reduce our controlled lot inventory and land spend commitments in the quarter for a minimal cost as we continue to only focus on projects that meet our stringent investment criteria. We saw an improvement in our cycle times and input costs during the third quarter and expect further gains in the fourth quarter of this year and into 2023. Our homebuyers continue to have a healthy financial profile, and our completed homes across our 45 plus markets are still at low levels. Our balance sheet remains strong with $2.1 billion in stockholders’ equity, and we intend to continue investing in our business and returning capital to shareholders throughout the various cycles in the market.”
Third Quarter 2022 Results
Net income for the third quarter 2022 increased 27% to $144.5 million, or $4.44 per diluted share, both third quarter records and as compared to $114.0 million, or $3.31 per diluted share, in the prior year quarter.
Total revenues rose to $1.1 billion, a third quarter record and 19% year over year increase. Home sales revenues increased 22% to $1.1 billion, a third quarter record as well, compared to $917.3 million for the prior year quarter. Deliveries increased 13% year over year to a third quarter record of 2,630 homes compared to 2,322 in the prior year quarter. The average sales price of home deliveries for the third quarter 2022 increased 8% to $425,300, compared to $395,100 in the prior year quarter, primarily due to home price appreciation across all our markets.
Net new home contracts in the third quarter 2022 were 1,318 contracts, compared to 2,742 contracts in the prior year quarter. At the end of the third quarter 2022, the Company had 3,455 homes in backlog, representing $1.4 billion of backlog dollar value.
Adjusted homebuilding gross margin percentage, excluding interest, was 26.0% in the third quarter of 2022, compared to 27.2% in the prior year quarter. Homebuilding gross margin percentage in the third quarter 2022 was 24.8%, as compared to 25.7% in the prior year quarter. Selling, general, and administrative expenses as a percent of home sales revenues was 9.9%, compared to 9.8% in the prior year quarter. Pre-tax income margin was 15.0% in the third quarter of 2022 compared to 15.2% in the prior year quarter.
Selling communities at the end of the third quarter increased 17% to 217 from 186 communities in the prior year quarter.
Return on equity for the third quarter of 2022 was 33.2%, compared to 30.5% in the prior year period, and represented our fifth consecutive quarter with a return on equity of over 30%.
Financial services revenues were $23.3 million compared to $29.1 million in the prior year quarter, and financial services pre-tax income decreased to $9.3 million from $11.4 million, primarily as a result of lower originations and normalization of gain on sale premiums.
Balance Sheet and Liquidity
The Company ended the quarter with a strong financial position, including $2.1 billion of stockholders’ equity, a 17% year over year increase, and $817.2 million of total liquidity, including $182.2 million of cash.
During the third quarter, the Company maintained its quarterly cash dividend of $0.20 per share and repurchased 500,825 shares of its common stock for $22.3 million, for an average per share price of $44.58 or 68% of ending book value as of September 30, 2022.
As of September 30, 2022, homebuilding debt to capital decreased to 36.3%, from 37.1% at June 30, 2022. As of September 30, 2022, net homebuilding debt to net capital decreased to 32.5%, from 33.6% at June 30, 2022.
Full Year 2022 Outlook
David Messenger, Chief Financial Officer of the Company, commented, “Given the continued industry-wide slowdown in current activity, we are reducing our full year home delivery guidance to 10,000 to 10,500 homes and home sales revenues to $4.2-4.4 billion. Given our decision to deliberately delay new community openings, we now expect our year end selling communities to be below our previous guidance of 240-250.”