Century Communities Inc
For the period ended Jun 30, 2024. Filed Jul 25, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 25, 2024
CCS$55.21-3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-04-25.
0001576940-24-000037
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-25.
0001576940-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 159 previous paragraphs and 156 current paragraphs.
94 unchanged; 49 reworded; 13 added; 14 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 17 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Cautionary Note Regarding Forward-Looking Statements
Current report
During the three and six months ended June 30, 2024, we generated total revenues of $1.0 billion and $2.0 billion, respectively, which represent increases of 23.1% and 24.5%, respectively, as compared to the respective prior year periods, driven primarily by increased home sales revenue from increased number of homes available for sale and increased average sales prices. During the three and six months ended June 30, 2024, we delivered 2,617 and 4,975 homes, respectively, with an average sales price of $388.8 thousand and $389.9 thousand, respectively. The number of homes delivered increased by 17.1% and 20.0%, respectively, during the three and six months ended June 30, 2024, as compared to the respective prior year periods, representing growth across all of our segments. Average sales price increased 6.2% and 4.1%, respectively, during the three and six months ended June 30, 2024, as compared to the respective prior year periods. During the three and six months ended June 30, 2024, net new contracts increased 20.0% and 30.1%, respectively, to 2,780 and 5,646, respectively, as compared to the respective prior year periods.
Current report
For the three and six months ended June 30, 2024, our Financial Services segment generated income before income tax of $5.7 million and $15.7 million, respectively, representing a decrease of 54.7% and 10.6%, respectively, as compared to the respective prior year periods. During the three and six months ended June 30, 2024, the number of mortgages originated increased by 30.0% and 39.4%, respectively, compared to the respective prior year periods, primarily due to our increased capture rate of 81% for both the three and six months ended June 30, 2024 as compared to 73% and 70% for the respective prior year periods, as well as a 34.6% and 37.8% increase, respectively, in the number of loans sold to third parties as compared to the respective prior year periods. While volume increased, the decreases in income before income tax for both the three- and six-month comparisons were primarily driven by an increase in financial services costs related to increased commissions, investor fees, and other support fees, and increases in net losses on the sale of mortgage loans, in each case in the current year periods as compared to the respective prior year period.
Current report
During the three and six months ended June 30, 2024, our West segment generated income before income tax expense of $32.2 million and $58.9 million, respectively, an increase of 114.9% and 156.7%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $64.4 million and $107.8 million, respectively. The revenue increases for the three and six- month comparisons were primarily driven by an increase of 28.0% and 33.3%, respectively, in the number of homes delivered, and increases of 14.3% and 5.2%, respectively, in the average sales price per home. The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.
Current report
During the three and six months ended June 30, 2024, our Mountain segment generated income before income tax expense of $34.4 million and $62.2 million, respectively, an increase of 39.2% and 18.4%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $29.7 million and $38.3 million, respectively. The revenue increases for the three and six- month comparisons were primarily driven by an increase of 6.8% and 7.8%, respectively, in the number of homes delivered, and for the three-month comparison increases of 5.8% in the average sales price per home. The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.
Current report
During the three and six months ended June 30, 2024, our Texas segment generated income before income tax expense of $17.8 million and $31.7 million, respectively, an increase of 55.7% and 109.6%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $19.5 million and $61.2 million, respectively. The revenue increases for the three and six- month comparisons were primarily driven by an increase of 7.8% and 17.0%, respectively, in the number of homes delivered, and increases of 7.1% and 9.7%, respectively, in the average sales price per home. The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.
Current report
During the three and six months ended June 30, 2024, our Southeast segment generated income before income tax expense of $25.8 million and $46.6 million, respectively, an increase of 43.6% and 55.7%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $36.7 million and $111.3 million, respectively. The revenue increases for the three and six- month comparisons were primarily driven by an increase of 26.9% and 53.9%, respectively, in the number of homes delivered, and for the three-month comparison increases of 3.5% in the average sales price per home. The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.
Current report
During the three and six months ended June 30, 2024, our Century Complete segment generated income before income tax expense of $29.0 million and $50.1 million, respectively, an increase of 77.6% and 65.5%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $48.7 million and $67.3 million, respectively. The revenue increases for the three and six- month comparisons were primarily driven by an increase of 21.3% and 14.2%, respectively, in the number of homes delivered, and increases of 1.9% and 2.6%, respectively, in the average sales price per home. The increases in the number of homes delivered were primarily driven by increases in the number of homes under construction, and the average sales price increases were driven by the mix of deliveries within individual communities.
Current report
Total assets increased to $4.3 billion as of June 30, 2024 as compared to $4.1 billion as of December 31, 2023, primarilyas a result of changes in our inventory balances within our homebuilding segments related to timing of home and land development construction activities and an increase in the number of homes under construction.
Current report
In addition, in the ordinary course of business, we explore, and from time to time, enter into purchase agreements to opportunistically acquire other homebuilders to add existing and future lots to our land portfolio and augment the organic expansion of our land portfolio. These acquisitions are often legally structured as asset acquisitions for cash and conditioned upon a due diligence investigation by us of the business for a limited period of time, in addition to other standard and customary closing conditions.
Current report
Stock Repurchases
Current report
Cash Dividends
Current report
Cash Flows— Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Removed paragraphs (14)
Previous report
During the three months ended March 31, 2024, we generated total revenues of $948.5 million, a 25.4% increase as compared to the prior year period, driven primarily by home sales revenue. During the three months ended March 31, 2024, we delivered 2,358 homes with an average sales price of $391.2 thousand, as compared to 1,912 homes with an average sales price of $384.7 thousand in the prior year period. Net new contracts increased 41.7% to 2,866, as compared to 2,022 in the prior year period.
Previous report
During the three months ended March 31, 2024, we generated financial services revenue of $24.9 million, representing an increase of 57.2% as compared to the prior year period, drivenby a 52.3% increase in the number of mortgages originated period over period, primarily due to our increased capture rate of 81% as of March 31, 2024 as compared to 66% for the prior year period, as well as a 41.2% increase in the number of loans sold to third parties period over period.
Previous report
During the three months ended March 31, 2024, our West segment generated income before income tax expense of $26.7 million, a 235.0% increase over the prior year period, which was driven by an increase in home sales revenue of $43.4 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by a 39.9% increase in the number of homes delivered, partially offset by a 4.5% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction. The average sales price decrease was driven by the mix of deliveries within individual communities.
Previous report
During the three months ended March 31, 2024, our Mountain segment generated income before income tax expense of $27.8 million, remaining consistent with the prior year period. Home sales revenue increased $8.5 million during the three months ended March 31, 2024, primarily driven by an 8.8% increase in the number of homes delivered, and partially offset by a 4.9% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction. The average sales price decrease was driven by the mix of deliveries within individual communities. For the three months ended March 31, 2024, the decrease in the percentage of income before income tax expense to home sales revenue was primarily a result of the mix of margin profiles within individual communities.
Previous report
During the three months ended March 31, 2024, our Texas segment generated income before income tax expense of $13.9 million, a 277.7% increase over the prior year period, which was driven by an increase in home sales revenue of $41.7 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by both a 29.7% increase in the number of homes delivered and by a 13.1% increase in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction, and the average sales price increase was driven by the mix of deliveries within individual communities.
Previous report
During the three months ended March 31, 2024, our Southeast segment generated income before income tax expense of $20.8 million, an 73.8% increase over the prior year period, which was driven by an increase in home sales revenue of $74.6 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by a 91.4% increase in the number of homes delivered, partially offset by a 2.9% decrease in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction, and the average sales price decrease was driven by the mix of deliveries within individual communities.
Previous report
During the three months ended March 31, 2024, our Century Complete segment generated income before income tax expense of $21.1 million, a 51.3% increase over the prior year period, which was driven by an increase in home sales revenue of $18.6 million. The revenue increase during the three months ended March 31, 2024 was primarily driven by both a 6.4% increase in the number of homes delivered and by a 3.4% increase in the average sales price per home. The increase in the number of homes delivered was primarily driven by an increase in the number of homes under construction, and the average sales price increase was driven by the mix of deliveries within individual communities.
Previous report
Total assets remained consistent at $4.1 billion as of March 31, 2024 and December 31, 2023.
Previous report
At-the-Market Offerings
Previous report
We are party to a Distribution Agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Wells Fargo Securities, LLC and Fifth Third Securities, Inc. (which we refer to as the “Distribution Agreement”), as sales agents pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through any of the sales agents party thereto in “at-the-market” offerings, in accordance with the terms and conditions set forth in the Distribution Agreement. The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the agreement. We did not sell or issue any shares of our common stock during the three months ended March 31, 2024 and 2023, respectively, and as of March 31, 2024, all $100.0 million remained available for sale.
Previous report
Stock Repurchase Program
Previous report
Dividends
Previous report
Cash Flows— Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023
Previous report
NM – Not Meaningful
Reworded paragraphs (49)
Previous wording
As used in this Form 10-Q, references to “we,” “us,” “our,” “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.
Current wording
As used in this Quarterly Report on Form 10-Q(which we refer to as this “Form 10-Q”), references to “we,” “us,” “our,” “Century” or the “Company” refer to Century Communities, Inc., a Delaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates.
Previous wording
Some of the statements included in this Quarterly Report on Form 10-Q (which we refer to as this “Form 10-Q”) constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” “outlook,” the negative of such terms and other comparable terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors.
Current wording
Some of the statements included in this Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual results could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential,” “outlook,” the negative of such terms and other comparable terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors.
Previous wording
Operations” and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including “Part II, Item 1A. Risk Factors,” and our other reports and filings with the SEC. If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q.
Current wording
Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including “Part II, Item 1A. Risk Factors,” and our other reports and filings with the SEC. If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q.
Previous wording
While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing our customers greater certainty on their financing and allowing us to more appropriately price the homes and deploy our capital. Of the 2,358 homes delivered during the first three months of 2024, approximately 94% of our deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately 98% of homes delivered were built as move-in ready homes.
Current wording
While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing our customers greater certainty on their financing and allowing us to more appropriately price the homes and deploy our capital. Of the 4,975 homes delivered during the first six months of 2024, approximately 94% of our deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately 98% of homes delivered were built as move-in ready homes.
Previous wording
We generated solid financial results during the three months ended March 31, 2024 and are encouraged by recent housing market conditions demonstrating strong, underlying demand for affordable new homes. While uncertainty remains surrounding interest rates, we experienced strong demand during the first quarter of 2024, as net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2024 increased 41.7% as compared to the prior year period. We have continued to provide, when necessary, incentive offerings across our communities during the first quarter of 2024, including discounts on base home prices, lot premiums, and options and upgrades and financing incentives, including interest rate buydowns. During the three months ended March 31, 2024, cycle times have remained in the four- to five-month timeframe.
Current wording
We generated solid financial results during the three and six months ended June 30, 2024 and are encouraged by recent housing market conditions demonstrating strong, underlying demand for affordable new homes. While uncertainty remains surrounding interest rates, we experienced strong demand during the first half of 2024, as net new home contracts (new home contracts net of cancellations) for the three and six months ended June 30, 2024 increased 20.0% and 30.1%, respectively, as compared to the same prior year periods. We have continued to provide, when necessary, incentive offerings across our communities during the first six months of 2024, including discounts on base home prices, lot premiums, and options and upgrades and financing incentives, including interest rate buydowns. During the six months ended June 30, 2024, cycle times have remained in the four- to five-month timeframe.
Previous wording
During the three months ended March 31, 2024, we generated $84.3 million in income before income tax expense, as compared to $44.0 million in the prior year period, and net income of $64.3 million, or $2.00 per diluted share, as compared to $33.3 million, or $1.04 per diluted share, respectively, in the prior year period.
Current wording
During the three and six months ended June 30, 2024, we generated $110.6 million and $195.0 million, respectively, in income before income tax expense, as compared to $68.7 million and $112.8 million, respectively, in the respective prior year periods. During the three and six months ended June 30, 2024, we generated net income of $83.7 million, or $2.61 per diluted share, and $148.1 million, or $4.60 per diluted share, respectively, as compared to $51.4 million, or $1.60 per diluted share, and $84.8 million, or $2.63 per diluted share, respectively, in the respective prior year periods.
Previous wording
We ended the first quarter of 2024 with no amounts outstanding under our revolving line of credit, $122.8 million of cash and cash equivalents, $84.8 million of cash held in escrow, a homebuilding debt to capital ratio of 29.4%, and a net homebuilding debt to net capital ratio of 24.9%. During the three months ended March 31, 2024, we paid a quarterly cash dividend to our stockholders of $0.26 per share, which represents a 13% increase from the $0.23 per share quarterly dividend paid during the three months ended March 31, 2023. We have continued to strategically manage our lot pipeline, resulting in 75,089 lots owned and controlled at March 31, 2024.
Current wording
We ended the first quarter of 2024 with $111.0 million outstanding under our revolving line of credit, $106.7 million of cash and cash equivalents, $44.8 million of cash held in escrow, a homebuilding debt to capital ratio of 31.1%, and a net homebuilding debt to net capital ratio of 28.1%. During the three and six months ended June 30, 2024, we paid quarterly cash dividends to our stockholders of $0.26 per share, which represents a 13% increase from the $0.23 per share quarterly dividends paid during the three and six months ended June 30, 2023. During the six months ended June 30, 2024, we have continued to strategically increase our lot pipeline, including both organically and through an acquisition, resulting in 78,097 lots owned and controlled at June 30, 2024.
Previous wording
Our Century Living operations are engaged in construction on three multi-family for rent projects in Colorado, which commenced in 2022 and comprise over 900 total units. The first multi-family property consisting of over 200 units became available for leasing during 2023, and we anticipate the remaining projects will be available for leasing during 2024.
Current wording
Our Century Living operations are engaged in construction on three multi-family for rent projects in Colorado, which commenced in 2022 and currently comprise over 900 total units. As of June 30, 2024, all three projects have begun leasing or pre-leasing, with 107 units completed, 90 units of which are occupied, and 845 units under development.
Previous wording
The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023:
Current wording
The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023:
Previous wording
(2)Homebuilding gross margin percentage is inclusive of impairment charges, if applicable. No impairment charges were recorded for the three months ended March 31, 2024 and 2023.
Current wording
(2)Homebuilding gross margin percentage is inclusive of impairment charges, if applicable. We recorded impairment charges of $0.6 million during the three and six months ended June 30, 2024. No impairment charges were recorded during the three and six months ended June 30,2023.
Previous wording
Our Financial Services segment originates mortgages primarily for our homebuyers, and as such, performance typically correlates to our number of homes delivered. Our Financial Services segment generated income before income tax of $10.0 million for the three months ended March 31, 2024, an increase of $5.0 million, or 98.0%, over the prior year period. This increase was driven by a $9.1 million increase in financial services revenue as compared to the prior year period. The increase in financial services revenue was primarily driven by a 52.3% increase in the number of mortgages originated period over period, primarily due to our increased capture rate of 81% as of March 31, 2024 as compared to 66% for the prior year period, as well as a 41.2% increase in the number of loans sold to third parties period over period.
Current wording
Our Financial Services segment originates mortgages primarily for our homebuyers, and as such, performance typically correlates to our number of homes delivered. For the three and six months ended June 30, 2024, our Financial Services segment generated income before income tax of $5.7 million and $15.7 million, respectively, representing a decrease of 54.7% and 10.6%, respectively, as compared to the respective prior year periods. During the three and six months ended June 30, 2024, the number of mortgages originated increased by 30.0% and 39.4%, respectively, compared to the respective prior year periods, primarily due to our increased capture rate of 81% for both the three and six months ended June 30, 2024 as compared to 73% and 70% for the respective prior year periods, as well as a 34.6% and 37.8% increase, respectively, in the number of loans sold to third parties as compared to the respective prior year periods. While volume increased, the decreases in income before income tax for both the three- and six-month comparisons were primarily driven by an increase in financial services costs related to increased commissions, investor fees, and other support fees, and increases in net losses on the sale of mortgage loans, in each case in the current year periods as compared to the respective prior year periods.
Previous wording
During the three months ended March 31, 2024, our Corporate segment generated a loss of $36.0 million as compared to a loss of $26.4 million during the same period in 2023. The increase in loss was primarily due to a $7.7 million impairment related to other investments during March 31, 2024.
Current wording
During the three and six months ended June 30, 2024, our Corporate segment generated losses of $34.3 million and $70.3 million, respectively as compared to a losses of $29.2 million and $55.6 million, respectively, during the same respective periods in 2023. The increase in loss for the three-month comparison was primarily due to an increase in compensation costs as compared to the period year period, and the increase in loss for the six-month comparison was primarily due to a $7.7 million impairment related to other investments during the six months ended June 30, 2024, as well as increased compensation costs as compared to the prior year period.
Previous wording
Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment, if applicable. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, increased for the three months ended March 31, 2024 to 21.3% as compared to 18.2% during the same period in 2023. The increase was primarily driven by deliveries during the prior year period that carried both higher incentives and elevated construction costs due to homes commencing construction during high costs periods in 2022.
Current wording
Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment, if applicable. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, increased for the three and six months ended June 30, 2024 to 22.5% and 22.0%, respectively, as compared to 19.7% and 19.0%, respectively, for the three and six months ended June 30, 2023. The increase was primarily driven by deliveries during the prior year periods that carried both higher incentives and elevated construction costs due to homes commencing construction during high costs periods in 2022.
Previous wording
In the following table, we calculate our homebuilding gross margin, as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues.
Current wording
In the following table, we calculate our homebuilding gross margin and our adjusted homebuilding gross margin, as adjusted to exclude inventory impairment, if applicable, and interest in cost of home sales revenues, and further adjusted to exclude the effect of purchase price accounting for acquired work in process inventory, if applicable.
Previous wording
For the three ended March 31, 2024, our adjusted homebuilding gross margin percentage excluding interest in cost of home sales revenues, inventory impairment, and purchase price accounting for work in process inventory, was 22.8% as compared to 19.6% for the same period in 2023. We believe the above information is meaningful as it isolates the impact that indebtedness, inventory impairment (if applicable), and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our competitors.
Current wording
For the three and six months ended June 30, 2024, our adjusted homebuilding gross margin percentage excluding inventory impairment (if applicable), interest in cost of home sales revenues, and purchase price accounting for work in process inventory (if applicable), was 24.0% and 23.4%, respectively, as compared to 21.0% and 20.3% for the same respective periods in 2023. We believe the above information is meaningful as it isolates the impact that inventory impairment (if applicable), indebtedness, and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our competitors.
Previous wording
Our selling, general and administrative expense increased $15.8 million for the three months ended March 31, 2024 as compared to the prior year period. This increase was primarily attributable to an increase in internal and external commission expense associated with the increase in home sales revenue and increased compensation and other costs due toincreased active community count. These increases were partially offset by a decrease in stock compensation expense related to forfeitures during the period. As a percentage of home sales revenue, our selling, general and administrative expense decreased 100 basis points during the three months ended March 31, 2024, driven primarily by increased revenue on a partially fixed cost base.
Current wording
Our selling, general and administrative expense increased $20.8 million and $36.6 million, respectively, for the three and six months ended June 30, 2024 as compared to the respective prior year periods. For both the three and six-month comparisons, these increases were primarily attributable to an increase in internal and external commission expense associated with the increase in home sales revenue and increased compensation and other costs due toincreased active community count. As a percentage of home sales revenue, our selling, general and administrative expense decreased 40 basis points and 70 basis points, respectively, during the three and six months ended June 30, 2024, driven primarily by increased revenue on a partially fixed cost base.
Previous wording
At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. Our 2024 estimated annual effective tax rate, before discrete items of 25.0%, is driven by our blended federal and state statutory rate of 24.7%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation offset by estimated federal energy home credits for current year home deliveries, which combined resulted in a net increase of 0.3%.
Current wording
At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. Our 2024 estimated annual effective tax rate, before discrete items of 24.6%, is driven by our blended federal and state statutory rate of 24.5%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation offset by estimated federal energy home credits for current year home deliveries, which combined resulted in a net increase of 0.1%.
Previous wording
For the three months ended March 31, 2024, our estimated annual rate of 25.0% was benefitted by discrete items which had a net impact of decreasing our rate by 1.3%, including the impact of excess tax benefits for vested stock-based compensation.
Current wording
For the six months ended June 30, 2024, our estimated annual rate of 24.6% was benefitted by discrete items which had a net impact of decreasing our rate by 0.5%, including the impact of excess tax benefits for vested stock-based compensation.
Previous wording
For the three months ended March 31, 2024 and 2023, we recorded income tax expense of $20.0 million and $10.7 million, respectively.
Current wording
For the three months ended June 30, 2024 and 2023, we recorded income tax expense of $26.9 million and $17.3 million, respectively. For the six months ended June 30, 2024 and 2023, we recorded income tax expense of $46.9 million and $28.0 million, respectively.
Previous wording
Of our total lots owned and controlled as of March 31, 2024, 42.2% were owned and 57.8% were controlled, as compared to 41.5% owned and 58.5% controlled as of December 31, 2023.
Current wording
Of our total lots owned and controlled as of June 30, 2024, 42.0% were owned and 58.0% were controlled, as compared to 41.5% owned and 58.5% controlled as of December 31, 2023.
Previous wording
Net new home contracts (new home contracts net of cancellations) for the three months ended March 31, 2024 increased by 844 homes, or 41.7%, to 2,866 as compared to 2,022 for the same period in 2023, primarily due to more homes available for sale, as well as favorable market conditions.
Current wording
Net new home contracts (new home contracts net of cancellations) for the three months ended June 30, 2024 increased by 463 homes, or 20.0%, to 2,780 as compared to 2,317 for the same period in 2023. Net new home contracts for the six months ended June 30, 2024 increased by 1,307 homes, or 30.1%, to 5,646 as compared to 4,339 for the same period in 2023. These increases were primarily due to more homes available for sale, as well as favorable market conditions.
Previous wording
Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of cancellations) for the three months ended March 31, 2024 and 2023 by segment are included in the tables below:
Current wording
Our overall monthly “absorption rate” (the rate at which home orders are contracted, net of cancellations) for the three and six months ended June 30, 2024 and 2023 by segment are included in the tables below:
Previous wording
During the three months ended March 31, 2024, our absorption rate increased by 31.0% to 3.8 per month as compared to the same period in 2023, driven by strong demand for new homes during the current period as homebuyers adjust to the higher interest rate environment.
Current wording
During the three and six months ended June 30, 2024, our absorption rates increased by 6.1% and 19.4%, respectively, to 3.5 per month and 3.7 per month, respectively, as compared to the same respective periods in 2023, driven by strong demand for new homes during the current period as homebuyers adjust to the higher interest rate environment.
Previous wording
Our selling communities increased by 19 communities to 253 communities at March 31, 2024 as compared to 234 at March 31, 2023. This 8.1% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts during the first quarter of 2024.
Current wording
Our selling communities increased by 33 communities to 266 communities at June 30, 2024 as compared to 233 at June 30, 2023. This 14.2% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts during the first six months of 2024.
Previous wording
Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. At March 31, 2024, we had 1,590 homes in backlog with a total value of $667.2 million, which represents decreases of 17.2% and 6.5%, respectively, as compared to 1,920 homes in backlog with a total value of $713.6 million at December 31, 2023. The decrease in backlog dollar value is primarily attributable to the decrease in backlog units.
Current wording
Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. At June 30, 2024, we had 1,753 homes in backlog, which represents a decrease of 12.4% as compared to 2,002 homes in backlog at June 30, 2023, with a total value of $754.6 million, as compared to $750.1 million at June 30, 2023. Backlog dollar value remained consistent due to an increase in average sales prices of backlog units offset by a decrease in the number of backlog units. Backlog average sales price increased 14.9% as compared to the period year period, largely due to mix, including a decrease in the percentage of Century Complete homes to total homes in backlog.
Previous wording
Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $1.0 billion as of March 31, 2024 and $1.1 billion as of December 31, 2023.
Current wording
Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $840.5 million as of June 30, 2024 and $1.1 billion as of December 31, 2023.
Previous wording
Our principal uses of capital for the three months ended March 31, 2024 were our land purchases, land development, home construction, the acquisition of Landmark Homes, share repurchases, dividends, and the payment of routine liabilities.
Current wording
Our principal uses of capital for the three and six months ended June 30, 2024 were our land purchases, land development, home construction, the acquisition of Landmark Homes, share repurchases, dividends, and the payment of routine liabilities.
Previous wording
We use funds generated by operations, available borrowings under our revolving line of credit facility, and proceeds from issuances of debt or equity, including our at-the-market facility, to fund our short term working capital obligations and fund our purchases of land, as well as land development, home construction activities, and other cash needs.
Current wording
We use funds generated by operations, available borrowings under our revolving line of credit, and proceeds from issuances of debt or equity to fund our short term working capital obligations and fund our purchases of land, as well as land development, home construction activities, and other cash needs.
Previous wording
Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available, or on favorable terms, especially in light of rising interest rates. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance debt, or dispose of certain assets to fund our operating activities and capital needs.
Current wording
Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available, or on favorable terms, especially if rising interest rates remain high. In a higher interest rate environment, we may incur additional interest expense on borrowings that bear floating interest rates, such as under our revolving line of credit, repurchase facilities, and construction loan agreements. To the extent these sources of capital are insufficient to meet our needs, we may also conduct additional public or private offerings of our securities, refinance debt, or dispose of certain assets to fund our operating activities and capital needs.
Previous wording
In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three months ended March 31, 2024, there were no material changes to the contractual obligations we previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on February 5, 2024.
Current wording
In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three and six months ended June 30, 2024, there were no material changes to the contractual obligations we previously described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that was filed with the SEC on February 5, 2024.
Previous wording
As of March 31, 2024, we had outstanding purchase contracts and option contracts for 43,379 lots totaling approximately $2.2 billion and we had $64.1 million of deposits for land contracts, of which $37.4 million were non-refundable cash deposits pertaining to land contracts. For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next 24 months. Our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change and dependent on future market conditions. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.
Current wording
As of June 30, 2024, we had outstanding purchase contracts and option contracts for 45,320 lots totaling approximately $2.6 billion and we had $86.8 million of deposits for land contracts, of which $46.7 million were non-refundable cash deposits pertaining to land contracts. For contracts for which cash deposits were non-refundable, and subject to the terms of the outstanding contracts continuing to meet our investment criteria, we currently anticipate performing on the majority of our purchase and option contracts during the next 24 months. Our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change and dependent on future market conditions. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.
Previous wording
(2)As of March 31, 2024, other financing obligations included $15.6 million related to insurance premium notes and certain secured borrowings, as well as $60.9 million outstanding under construction loan agreements, as described below. As of December 31, 2023, other financing obligations included $24.7 million related to insurance premium notes and certain secured borrowings, as well as $44.9 million outstanding under construction loan agreements.
Current wording
(2)As of June 30, 2024, other financing obligations included $8.8 million related to insurance premium notes and certain secured borrowings, as well as $72.9 million outstanding under construction loan agreements, as described below. As of December 31, 2023, other financing obligations included $24.7 million related to insurance premium notes and certain secured borrowings, as well as $44.9 million outstanding under construction loan agreements.
Previous wording
In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of March 31, 2024 and December 31, 2023, we had $509.0 million and $510.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance and other bonds are not generally fully released until all development and construction activities are completed.
Current wording
In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As of June 30, 2024 and December 31, 2023, we had $514.8 million and $510.5 million, respectively, in letters of credit and performance and other bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance and other bonds are not generally fully released until all development and construction activities are completed.
Previous wording
As of March 31, 2024, $60.9 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.5% during the three months ended March 31, 2024, and we were in compliance with all covenants thereunder.
Current wording
As of June 30, 2024, $72.9 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.4% as of June 30, 2024, and we were in compliance with all covenants thereunder.
Previous wording
In 2021, we entered into a Second Amended and Restated Credit Agreement (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement, provides us with a senior unsecured revolving line of credit (which we refer to as the “revolving line of credit”) of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The revolving line of credit includes a $250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $200.0 million. Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. Borrowings under the Second A&R Credit Agreement are based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the secured overnight financing rate administered by the Federal Reserve Bank of New York, plus 0.10%.
Current wording
We are party to a Second Amended and Restated Credit Agreement, as amended, (which we refer to as the “Second A&R Credit Agreement”) with Texas Capital Bank, National Association, as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement, which amended and restated our prior Amended and Restated Credit Agreement, provides us with a senior unsecured revolving line of credit (which we refer to as the “revolving line of credit”) of up to $800.0 million, and unless terminated earlier, will mature on April 30, 2026. The revolving line of credit includes a $250.0 million sublimit for standby letters of credit and a $50.0 million sublimit for swingline loans. Under the terms of the Second A&R Credit Agreement, we are entitled to request an increase in the size of the revolving line of credit by an amount not exceeding $200.0 million. Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. Borrowings under the Second A&R Credit Agreement are based on an adjusted term SOFR reference rate, which equals the greater of (i) 0.50% or (ii) the one-month quotation of the SOFR administered by the Federal Reserve Bank of New York, plus 0.10%.
Previous wording
As of March 31, 2024 and December 31, 2023, no amounts were outstanding under our revolving line of credit and were in compliance with all covenants under the Second A&R Credit Agreement.
Current wording
As of June 30, 2024, $111.0 million was outstanding under our revolving line of credit, with borrowings that bore an interest rate of 7.5%, and were in compliance with all covenants under the Second A&R Credit Agreement. As of December 31, 2023, no amount was outstanding under the revolving line of credit.
Previous wording
Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., Texas Capital Bank, and U.S. Bank National Association, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $450.0 million as of March 31, 2024, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through March 21, 2025. Borrowings under the mortgage repurchase facilities bear interest at variable interest rates per annum equal to SOFR plus an applicable margin, and bore a weighted average interest rate of 7.2% during the year ended March 31, 2024.
Current wording
Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., Texas Capital Bank, and U.S. Bank National Association, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $350.0 million as of June 30, 2024, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through March 21, 2025. Borrowings under the mortgage repurchase facilities bear interest at variable interest rates per annum equal to SOFR plus an applicable margin, and bore a weighted average interest rate of 7.1% as of June 30, 2024.
Previous wording
Amounts outstanding under the repurchase facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of March 31, 2024 and December 31, 2023, we had $212.4 million and $239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.
Current wording
Amounts outstanding under the repurchase facilities are not guaranteed by us or any of our subsidiaries, and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As of June 30, 2024 and December 31, 2023, we had $248.8 million and $239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.
Previous wording
During the three months ended March 31, 2024, an aggregate of 186.9 thousand shares were repurchased for a total purchase price of approximately $16.1 million and a weighted average price of $86.16 per share. During the three months ended March 31, 2023, we did not repurchase any shares of common stock. The maximum number of shares available to be repurchased under the stock repurchase program as of March 31, 2024 was 1,043,123 shares.
Current wording
Our Board of Directors authorized a stock repurchase program in 2018, under which we may repurchase up to 4.5 million shares of our outstanding common stock. During the three and six months ended June 30, 2024, an aggregate of 465.0 thousand and 651.9 thousand shares, respectively, were repurchased for a total purchase price of approximately $37.0 million and $53.1 million, respectively, and a weighted average price of $79.61 and $81.49 per share, respectively. During the three and six months ended June 30, 2023, an aggregate of 30.4 thousand shares were repurchased for a total purchase price of approximately $2.0 million and a weighted average price of $64.84 per share. The maximum number of shares available to be repurchased under the stock repurchase program as of June 30, 2024 was 578,143 shares.
Previous wording
Our Board of Directors authorized a stock repurchase program in 2018, under which we may repurchase up to 4.5 million shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of our common stock, trading volume, other capital management objectives and opportunities, applicable legal requirements, applicable tax effects including the 1% excise tax instituted under the Inflation Reduction Act of 2022, and general market and economic conditions.
Current wording
On July 22, 2024, our Board of Directors approved a new stock repurchase program under which we may repurchase up to an additional 4.5 million shares. Under the terms of these programs, shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program is determined by management at its discretion and depends on a number of factors, including, among others, the market price of our common stock, trading volume, our available cash balance, our anticipated working capital needs, other capital management objectives and opportunities, applicable legal requirements, applicable tax effects including the 1% excise tax instituted under the Inflation Reduction Act of 2022, and general market and economic conditions. We finance any stock repurchases through available cash and our revolving line of credit. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. Our stock repurchase programs have no expiration dates and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the programs will be cancelled and returned to the status of authorized but unissued shares of common stock.
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Previous report — wording carried elsewhere
Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Previous report — wording carried elsewhere
We intend to finance any stock repurchases through available cash and our revolving line of credit. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The stock repurchase program has no expiration date and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the program will be cancelled and returned to the status of authorized but unissued shares of common stock.