Century munities(CCS) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, pre-tax income was $53 million and net income was$ 39 million, translating to $1.26 per diluted share, while adjusted net income was$ 42 million or $1.36 per diluted share [23] - Home sales revenues for Q1 were$ 884 million, down 4% year-over-year due to lower deliveries and average sales price [24] - The average sales price in Q1 was $387,000, a decrease of 1% year-over-year [24] - Adjusted homebuilding gross margin was 21.6%, down from 22.9% in Q4 2024, while GAAP homebuilding gross margin was 19.9%, compared to 20.6% in the prior quarter [26] Business Line Data and Key Metrics Changes - Deliveries totaled 2,284 homes in Q1, a decline of 3% year-over-year, while net new contracts totaled 2,692 homes, a 6% decline versus the previous year but a 33% increase over Q1 2023 [10][24] - The absorption pace averaged 2.8% in Q1 2025, with a sequential increase in February and March, but was trending below Q1 levels in April [10][11] Market Data and Key Metrics Changes - The company experienced a slower than typical spring selling season due to economic uncertainty, interest rate volatility, and eroding consumer confidence [7] - The absorption rate in Texas was particularly low at 2.1%, impacting overall performance [40] Company Strategy and Development Direction - The company aims to balance pace and price at the community level to optimize returns, focusing on monetizing and completing homes while managing starts [11][12] - The community count increased by 26% year-over-year, ending Q1 with 318 communities, and the company expects mid-single-digit percentage growth in community count for year-end 2025 [18] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is underlying demand for affordable new homes, current headwinds are affecting sales cycles and consumer confidence [7][8] - The company is proactively managing costs and targeting incentives to drive sales, while also preparing for potential supply chain disruptions due to tariffs [12][66] Other Important Information - The company increased its quarterly cash dividend to$ 0.29 per share and repurchased 753,000 shares for $56 million at an average price of$ 73.76, representing a 13% discount to book value [31] - Full-year home delivery guidance was reduced to a range of 10,400 to 11,000 homes due to ongoing economic uncertainty [32] Q&A Session Summary Question: Absorption rate differences between Century Complete and regional businesses - Management explained that Century Complete performed better due to less direct competition in certain markets, while Texas had the lowest absorption rate impacting overall performance [36][39] Question: Future pricing strategies for moving product - Management indicated that they are using both price reductions and interest rate buy downs to move unsold homes, anticipating a potential increase in incentives [41][42] Question: Guidance for closings in the back half of the year - Management stated that community count growth will support higher closings in the second half of the year, despite current headwinds [47][48] Question: SG&A savings from workforce reductions - Management confirmed that cost savings from layoffs and other initiatives are incorporated into the SG&A guidance for the full year [49][50] Question: Pricing and buy down strategies - Management noted that the average rate for buy downs has been consistent in the mid-fives, with a mix of price cuts and incentives being used [54][55] Question: Timing of incentive increases - Management clarified that recent incentives were implemented in response to market volatility and aimed at achieving desired absorption rates [60][61] Question: Concerns about supply chain disruptions - Management acknowledged the potential for supply chain disruptions but stated that no significant impacts have been observed to date [66]