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Century munities(CCS) - 2025 Q3 - Earnings Call Transcript

2025-10-22 22:02

Financial Data and Key Metrics Changes - In Q3 2025, pre-tax income was $48 million, net income was $37 million, and adjusted net income was $46 million, reflecting increases of 7% and 10% sequentially [13] - Home sales revenues were $955 million, down 2% sequentially, while deliveries of homes declined by 4% [13] - Adjusted home building gross margin improved to 20.1% from 20% in Q2, driven by lower direct costs offsetting higher incentives [14] Business Line Data and Key Metrics Changes - The company delivered 2,486 homes, hitting the high end of guidance, with an average sales price of $384,000, up 2% quarter-over-quarter [4][13] - Net new contracts for Q3 were 2,386 homes, a decline of 6% sequentially, but better than the historical average decline of 9% [8] - The ending community count increased by 5% year-over-year to 321 communities [10] Market Data and Key Metrics Changes - The company holds top 10 positions in 13 of the 50 largest U.S. markets, with expectations for mid-single-digit percentage growth in community count by year-end 2025 [6] - The average cycle time for home deliveries improved to 115 calendar days, with one-third of divisions achieving 100 days or less [7] Company Strategy and Development Direction - The company aims to deepen its market share in existing markets while controlling costs and maintaining an adequate supply of land [18] - The strategy includes investing in people, processes, and systems to drive operational improvements, with expectations for growth to be realized once the market normalizes [6][18] Management's Comments on Operating Environment and Future Outlook - Management noted that while home buyer demand has been muted due to economic uncertainty, there is pent-up demand for affordable homes supported by demographic trends [5] - The company expects that any interest rate relief and improvement in consumer confidence will unlock buyer demand [5] Other Important Information - The company repurchased $20 million of its shares in Q3, totaling 6% of shares outstanding year-to-date [4][17] - The company completed a private offering of $500 million in senior notes, providing flexibility with leverage management [17] Q&A Session Summary Question: Adjusted gross margin performance - Management attributed the adjusted gross margin exceeding guidance to successful cost controls and lower direct costs, despite increased incentives [20] Question: Impact of adjustable-rate mortgages (ARMs) - Management noted a significant increase in ARMs usage among buyers, which helps address affordability challenges, and expects this trend to continue [21] Question: Community count guidance - Management confirmed a mid-single-digit increase in community count by year-end, indicating a significant ramp-up in Q4 [25][26] Question: Consumer behavior and incentives - Management observed cautious consumer behavior, particularly at entry-level price points, and anticipates increased incentives in Q4 due to competition [28] Question: SG&A cost reductions - Management highlighted operational efficiencies and headcount adjustments as key drivers for lower SG&A costs, with a focus on maintaining efficiency going forward [32][33] Question: Lot abandonment and future projects - Management explained that they are underwriting to current market conditions, leading to the exit from certain projects, while maintaining a steady owned lot count [35] Question: Average sales price dynamics - Management clarified that the sequential lift in average sales price was primarily driven by a favorable mix of deliveries rather than incentives [38] Question: Tariff impact for next year - Management stated it is too early to estimate the impact of tariffs for next year, as the situation remains fluid [41]

Century munities(US:CCS)

Century munities(CCS) - 2025 Q3 - Earnings Call Transcript

2025-10-22 22:00

Financial Data and Key Metrics Changes - In Q3 2025, pre-tax income was $48 million and net income was $37 million, representing increases of 7% and 10% sequentially respectively [15] - Adjusted net income was $46 million or $1.52 per diluted share, while EBITDA for the quarter was $70 million and adjusted EBITDA was $82 million [15] - Home sales revenues were $955 million, down 2% sequentially, with deliveries of 2,486 homes declining by 4% [15][17] - The average sales price increased by 2% to $384,000, benefiting from a higher percentage of deliveries from the West and Mountain regions [15] Business Line Data and Key Metrics Changes - Adjusted home building gross margin was 20.1%, up from 20% in Q2, driven by lower direct costs offsetting higher incentives [17] - The company started 2,440 homes in Q3 and maintained a focus on matching starts with sales [11] - The ending community count increased by 5% year-over-year to 321 communities, with expectations for mid-single-digit growth by year-end 2025 [12][21] Market Data and Key Metrics Changes - Net new contracts for Q3 were 2,386 homes, a decline of 6% sequentially, but better than the historical average decline of 9% [10] - Customer satisfaction scores reached all-time highs, leading to more referrals and lower warranty costs [10] - The company observed a shift in mortgage types, with adjustable-rate mortgages (ARMs) accounting for close to 20% of originated mortgages in Q3, up from less than 5% in Q1 [13] Company Strategy and Development Direction - The company aims to deepen its market share in existing markets, with a goal of increasing community count and controlling costs [5][21] - Investments in people, processes, and systems are expected to drive future improvements, with confidence that the value of these investments will be realized once the market normalizes [6] - The company remains disciplined in land acquisitions, adjusting to current market conditions and seeing reductions in raw land and development costs [13] Management's Comments on Operating Environment and Future Outlook - Management noted that home buyer demand has been muted due to weaker consumer confidence, but there is pent-up demand for affordable homes [5] - The company expects that any interest rate relief and improvement in consumer confidence will unlock buyer demand [5] - Management anticipates that incentives will be the largest driver of changes to gross margins in the near term, with expectations for an increase in incentives in Q4 [11][21] Other Important Information - The company completed a private offering of $500 million of 2033 notes, using the proceeds to redeem $500 million of 2027 senior notes, providing flexibility with leverage management [20] - The company maintained a quarterly cash dividend of $0.29 per share and repurchased 297,000 shares for $20 million [20] Q&A Session Summary Question: Regarding adjusted gross margin performance - Management attributed the better-than-expected adjusted gross margin to successful cost controls and lower direct costs, despite some pressures from increased incentives [24] Question: Impact of adjustable-rate mortgages on business - Management noted that ARMs have gained wider acceptance, particularly among first-time home buyers, and expect this trend to continue into Q4 [26] Question: Community count guidance and ramp-up in Q4 - Management confirmed the community count is expected to increase by around 5% year-over-year, with consistent monitoring of community developments [30] Question: Consumer behavior and incentives - Management observed a cautious consumer environment, particularly at entry-level price points, and anticipates increased incentives in Q4 due to competition among builders [34] Question: SG&A cost reductions - Management highlighted various cost control activities contributing to lower SG&A costs, including operational efficiencies and headcount adjustments [38] Question: Lots walked away from during the quarter - Management explained that they are underwriting to current market conditions and have exited certain near-term projects that did not fit current underwriting standards [40]