Century munities(CCS) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Deliveries of 2,358 homes increased by 23% year-over-year, marking the second highest level of first quarter deliveries in the company's history [9] - Revenues for the first quarter reached $949 million, a 26% increase compared to the prior-year period [9][35] - Adjusted diluted earnings per share rose to$ 2.22, reflecting a 114% year-over-year increase [9][51] - Average sales price was $391,200, up 4% sequentially [35] - SG&A as a percentage of home sales revenue decreased to 12.4% from 13.4% year-over-year [37] - Home building debt to capital ratio decreased to 29.4% from 29.9% at the end of the previous quarter [38] Business Line Data and Key Metrics Changes - Century Complete accounted for 33% of first quarter deliveries, down from 39% in the fourth quarter of 2023 [35][81] - The average sales price for Century Complete homes is in the range of$ 260,000 to $275,000, with a 35% quarter-over-quarter increase in sales [87] - The company opened 42 new communities and closed 40 during the quarter, with a community count of 253, the highest in its history [15][16] Market Data and Key Metrics Changes - The Southeast region experienced the highest growth rate in deliveries at 91% year-over-year [18] - Monthly absorption rates averaged 3.8 in the first quarter, up from 2.9 in the prior-year period [28] - The backlog of sold homes at the end of the first quarter was 1,590 units valued at$ 667 million, with an average price of $420,000 [52] Company Strategy and Development Direction - The company focuses on affordability, with over 90% of deliveries priced below FHA limits, positioning itself for future growth [10] - The strategy includes a land-light approach, acquiring finished lots where possible, with approximately 75,000 owned and controlled lots, a 46% year-over-year increase [31][60] - The company anticipates community count growth throughout 2024, with increases more heavily weighted towards the second half of the year [78] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand for affordable homes and the ability to manage costs effectively [20] - The company is maintaining its guidance for full-year 2024 deliveries in the range of 10,000 to 11,000 homes, citing uncertainty around interest rates [39] - Management noted that while there is positive momentum, they are cautious about potential interest rate fluctuations impacting the business [58] Other Important Information - The company was recognized as the highest ranked homebuilder on Newsweek's list of America's Most Trustworthy Companies for the second consecutive year [29] - The company increased its quarterly cash dividend by 13% to$ 0.26 per share and repurchased 186,887 shares for $16.1 million [38] Q&A Session Summary Question: What is the expected timeline for lots being ready to build? - Management indicated that lots range from finished lots ready for immediate use to full development deals with third-party developers [42] Question: What percentage of optioned lots are with third-party developers? - Management stated that Century Complete relies entirely on third-party developers for finished lots, while the Communities brand develops with both third-party and in-house efforts [43] Question: Will incentives decline sequentially in the second quarter? - Management acknowledged a potential drag from purchase accounting related to a recent acquisition, which may affect margins in the upcoming quarters [45] Question: What percentage of closings in the first quarter used a mortgage rate buydown? - Over 75% of buyers utilized some form of mortgage incentive [73] Question: What are the capital allocation priorities regarding share buybacks? - The company has over one million shares authorized for buyback and will consider market dislocations compared to book price for future buybacks [89]