Century Communities Inc
For the period ended Sep 30, 2024. Filed Oct 24, 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.
Sep 30, 2024 · Filed Oct 24, 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 2024-06-30; filed 2024-07-25.
0001576940-24-000059
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-24.
0001576940-24-000074
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 156 previous paragraphs and 156 current paragraphs.
98 unchanged; 50 reworded; 8 added; 7 removed; 1 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 (8)
Current report
the effect of and risks associated with our recent acquisitions;
Current report
Our Century Living operationsare engaged in the development, construction and management of multi-family rental properties in Colorado, and currently comprise over 1,200 total units. As of September 30, 2024, one project had been successfully completed and available for leasing, and three projects remain under construction, two of which were available for pre-leasing. As of September 30, 2024, 407 units had been completed, 193 units of which were occupied, and 872 units were under development.
Current report
During the three and nine months ended September 30, 2024, our West segment generated income before income tax expense of $35.2 million and $94.1 million, respectively, an increase of 12.1% and 73.1%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $73.0 million and $180.8 million, respectively. The revenue increases for the three- and nine-month comparisons were primarily driven by an increase of 29.2% and 31.7%, respectively, in the number of homes delivered, and increases of 11.1% and 7.4%, 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 nine months ended September 30, 2024, our Mountain segment generated income before income tax expense of $31.8 million and $93.9 million, respectively, an increase of 24.8% and 20.5%, respectively, over the respective prior year period, which were driven by increases in home sales revenue of $64.2 million and $102.4 million, respectively. The revenue increases for the three and nine-month comparisons were primarily driven by an increase of 23.6% and 12.8%, respectively, in the number of homes delivered, and increases of 6.0% and 2.0%, 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 months ended September 30, 2024, our Texas segment generated income before income tax expense of $14.7 million, a decrease of 10.3% over the prior year period, which was primarily driven by a decrease of 5.5% in the percentage of income before income tax expense to home sales revenues due to a decreased gross margin on home sales, which included purchase price accounting of $2.7 million related to our purchase of Anglia. This decrease was partially offset by an increase in home sales revenue of $47.8 million, primarily driven by an increase of 38.7% in the number of homes delivered and an increase of 2.9% in the average sales price per home. During the nine months ended September 30, 2024, our Texas segment generated income before income tax expense of $46.4 million, an increase of 47.2% over the prior year period, which was driven by an increase in home sales revenue of $109.0 million. The revenue increase was primarily driven by an increase of 24.2% in the number of homes delivered, and an increase of 7.3% in the average sales price per home. For both the three- and nine-month comparisons, 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 months ended September 30, 2024, our Southeast segment generated income before income tax expense of $27.2 million, a decrease of 19.3% over the prior year period, which was primarily driven by a decrease of 5.4% in the percentage of income before income tax expense to home sales revenues due to a decreased margin on home sales and impairment recognized during the current year period. This decrease was partially offset by an increase in home sales revenue of $15.4 million, primarily driven by an increase of 13.0% in the number of homes delivered, and partially offset by a decrease of 3.2% in the average sales price per home. During the nine months ended September 30, 2024, our Southeast segment generated income before income tax expense of $73.9 million, an increase of 16.0% over the prior year period, which was driven by an increase in home sales revenue of $126.6 million. The revenue increase was primarily driven by an increase of 35.7% in the number of homes delivered, and partially offset by a decrease of 1.0% in the average sales price per home. For both the three- and nine-month comparisons, 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 decreases were driven by the mix of deliveries within individual communities.
Current report
During the three and nine months ended September 30, 2024, our Century Complete segment generated income before income tax expense of $34.1 million and $84.2 million, respectively, an increase of 10.3% and 37.6%, respectively, over the respective prior year period, which increases were driven by increases in home sales revenue of $50.7 million and $118.0 million, respectively. The revenue increases for the three and nine- month comparisons were primarily driven by an increase of 23.9% and 17.6%, respectively, in the number of homes delivered, primarily driven by increases in the number of homes under construction.
Current report
Cash Flows— Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Removed paragraphs (7)
Previous report
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 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Cash Flows— Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
Reworded paragraphs (50)
Previous wording
economic changes, either nationally or in the markets in which we operate, including increased interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels;
Current wording
economic changes, either nationally or in the markets in which we operate, including changes in interest rates and the resulting impact on the accessibility of mortgage loans to homebuyers, persistent inflation, and decreased employment levels;
Previous wording
Our Century Communities brandhas an emphasis on serving the entry-level homebuilding market butoffers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.
Current wording
Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states. In many of our projects, in addition to building homes, we entitle and develop the underlying land. We build and sell homes under our Century Communities and Century Complete brands. Our Century Communities brandhas an emphasis on serving the entry-level homebuilding market butoffers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.
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 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.
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 7,809 homes delivered during the first nine months of 2024, approximately 93% 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
On January 22, 2024, we closed on the acquisition of substantially all the assets of Landmark Homes of Tennessee, Inc. (“Landmark”), a homebuilder with operations, including six active communities, in Nashville, Tennessee, for approximately $33.4 million in cash, inclusive of customary holdbacks.
Current wording
During 2024, we have completed two acquisitions. On July 31, 2024, we closed on the acquisition of substantially all the assets and operations and assumed certain liabilities of Anglia Homes LP (“Anglia”), a homebuilder with operations in the greater Houston, Texas area, for approximately $127.0 million in cash, inclusive of customary holdbacks. On January 22, 2024, we closed on the acquisition of substantially all the assets and assumed certain liabilities of Landmark Homes of Tennessee, Inc. (“Landmark”), a homebuilder with operations, including six active communities, in Nashville, Tennessee, for approximately $33.4 million in cash, inclusive of customary holdbacks.
Previous 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.
Current wording
Current housing market conditions demonstrate solid, underlying demand for affordable new homes and, coupled with a more recent moderation in mortgage rates, we experienced solid demand during the first nine months of 2024, as net new home contracts (new home contracts net of cancellations) for the three and nine months ended September 30, 2024 increased 19.3% and 26.5%, respectively, as compared to the same prior year periods. We have continued to provide, when necessary, incentive offerings across our communities during the first nine months of 2024, including discounts on base home prices, lot premiums, and options and upgrades and financing incentives, including interest rate buydowns. During the nine months ended September 30, 2024, cycle times have remained in the four- to five-month timeframe.
Previous wording
We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy, andwe expect our operating strategy will continue to adapt to market changes, though we cannot provide any assurance that our strategies will remain consistent or continue to be successful. We believe future demand for our homes remains uncertain as future economic and market conditions remain uncertain, in particular with respect to inflation; the impact of potential future increases or decreases to the federal funds interest rate by the Federal Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial markets, credit and mortgage markets; the extent to which and how long government monetary directives, actions, and economic relief efforts will impact the U.S. economy; consumer confidence; wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental prices; availability and cost of land, labor and construction materials; demographic trends; housing demand; and other factors, including those described elsewhere in this Form 10-Q. Specifically, changes in mortgage interest rates impact the costs of owning a home and affect the purchasing power of our customers and could impact homebuyer confidence. Changes in demand for our homes or cancellations due to mortgage interest rates or otherwise affect our operating results in future periods, including our net sales, home deliveries, gross margin, origination volume of and revenues from our Financial Services segment, and net income. As a result, our past performance may not be indicative of our future results.
Current wording
We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the macro-economic environment and the local economy, andwe expect our operating strategy will continue to adapt to market changes, though we cannot provide any assurance that our strategies will remain consistent or continue to be successful. We believe future demand for our homes remains uncertain as future economic and market conditions remain uncertain, in particular with respect to inflation; the impact of potential future increases or decreases to the federal funds interest rate by the Federal Reserve; interest rates; availability and cost of mortgage loans to homebuyers; financial markets, credit and mortgage markets; the extent to which and how long government monetary directives, actions, and economic relief efforts will impact the U.S. economy; consumer confidence; wage growth; household formations; levels of new and existing homes for sale; prevailing home and rental prices; availability and cost of land, labor and construction materials; demographic trends; housing demand; the effect of the U.S. Presidential election on the economy, consumer confidence and homebuilding; and other factors, including those described elsewhere in this Form 10-Q. Specifically, changes in mortgage interest rates impact the costs of owning a home and affect the purchasing power of our customers and could impact homebuyer confidence. Changes in demand for our homes or cancellations due to mortgage interest rates or otherwise affect our operating results in future periods, including our net sales, home deliveries, gross margin, origination volume of and revenues from our Financial Services segment, and net income. As a result, our past performance may not be indicative of our future results.
Previous wording
Despite future macro-economic uncertainty, especially in relation to the interest rate environment, we believe we are well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase in our key markets and the favorable demographics that support the need for new affordable housing. We believe our operations are prepared to withstand volatility in future market conditions as a result of our product offerings which both span the home buying segment and focus on affordable price points, and our current and future inventories of attractive land positions. We have continued to focus on maintaining an appropriate balance of home and land inventories in relation to anticipated future demand, as well as prudent leverage, and, as a result, we believe we are well positioned to continue to execute on our strategy to optimize stockholder returns.
Current wording
We believe we are well-positioned to benefit from any future declines in mortgage interest rates, the ongoing shortage of both new and resale homes available for purchase in our key markets, and the favorable demographics that support the need for new affordable housing. We believe our operations are prepared to withstand volatility in future market conditions as a result of our product offerings which both span the home buying segment and focus on affordable price points, and our current and future inventories of attractive land positions. We have continued to focus on maintaining an appropriate balance of home and land inventories in relation to anticipated future demand, as well as prudent leverage, and, as a result, we believe we are well positioned to continue to execute on our strategy to optimize stockholder returns.
Previous 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.
Current wording
During the three and nine months ended September 30, 2024, we generated $109.9 million and $304.9 million, respectively, in income before income tax expense, as compared to $112.0 million and $224.8 million, respectively, in the respective prior year periods. During the three and nine months ended September 30, 2024, we generated net income of $83.0 million, or $2.59 per diluted share, and $231.1 million, or $7.19 per diluted share, respectively, as compared to $83.2 million, or $2.58 per diluted share, and $167.9 million, or $5.21 per diluted share, respectively, in the respective prior year periods.
Previous wording
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 wording
During the three and nine months ended September 30, 2024, we generated total revenues of $1.1 billion and $3.1 billion, respectively, which represent increases of 27.8% and 25.7%, 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 nine months ended September 30, 2024, we delivered 2,834 and 7,809 homes, respectively, with an average sales price of $393.8 thousand and $391.3 thousand, respectively. The number of homes delivered increased by 25.2% and 21.8%, respectively, during the three and nine months ended September 30, 2024, as compared to the respective prior year periods, representing growth across all of our segments. Average sales price increased 3.1% and 3.7%, respectively, during the three and nine months ended September 30, 2024, as compared to the respective prior year periods. During the three and nine months ended September 30, 2024, net new contracts increased 19.3% and 26.5%, respectively, to 2,563 and 8,209, respectively, as compared to the respective prior year periods.
Previous 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.
Current wording
We ended the third quarter of 2024 with $149.2 million of cash and cash equivalents and $70.8 million of cash held in escrow. We had $414.0 million outstanding under our revolving line of credit, with a homebuilding debt to capital ratio of 35.8% and a net homebuilding debt to net capital ratio of 32.1%. During the three and nine months ended September 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 nine months ended September 30, 2023. During the nine months ended September 30, 2024, we have continued to strategically increase our lot pipeline, including both organically and through acquisitions, resulting in 80,121 lots owned and controlled at September 30, 2024.
Previous wording
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 wording
For the three and nine months ended September 30, 2024, our Financial Services segment generated income before income tax of $3.1 million and $18.8 million, respectively, representing a decrease of 74.8% and 36.9%, respectively, as compared to the respective prior year periods. During the three and nine months ended September 30, 2024, the number of mortgages originated increased 45.5% and 41.6%, respectively, as compared to the respective prior year periods, which benefited from increased capture rates, and the number of loans sold to third parties increased 35.5% and 37.0%, respectively, as compared to the respective prior year periods. While total loan origination volumes increased during the three and nine months ended September 30, 2024, the decrease in income before income tax is primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in the fair value of our mortgage servicing rights portfolio.
Previous wording
The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023:
Previous 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.
Current wording
(2)Homebuilding gross margin percentage is inclusive of impairment charges, if applicable. We recorded impairment charges of $1.4 million and $1.9 million during the three and nine months ended September 30, 2024. No impairment charges were recorded during the three and nine months ended September 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. 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.
Current wording
Our Financial Services segment originates mortgages primarily for our homebuyers, and as such, the volume of loans originated typically correlates to our number of homes delivered. Fluctuations in financial services income before income tax may occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. For the three and nine months ended September 30, 2024, our Financial Services segment generated income before income tax of $3.1 million and $18.8 million, respectively, representing a decrease of 74.8% and 36.9%, respectively, as compared to the respective prior year periods. During the three and nine months ended September 30, 2024, the number of mortgages originated increased 45.5% and 41.6%, respectively, as compared to the respective prior year periods, which benefited from increased capture rates, and the number of loans sold to third parties increased 35.5% and 37.0%, respectively, as compared to the respective prior year periods. While total loan origination volumes increased during the three and nine months ended September 30, 2024, the decrease in income before income tax is primarily driven by lower margins on mortgages originated due to a more competitive market, as well as a decrease in the fair value of our mortgage servicing rights portfolio.
Previous 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.
Current wording
During the three and nine months ended September 30, 2024, our Corporate segment generated losses of $36.1 million and $106.4 million, respectively as compared to a losses of $38.0 million and $93.7 million, respectively, during the same respective periods in 2023. The decrease in loss for the three-month comparison was primarily due to a decrease in compensation costs as compared to the prior year period. The increase in loss for the nine-month comparison was primarily due to increased insurance and acquisition costs and a reduction in interest income as compared to the prior year period, as well as a $7.7 million impairment related to other investments during the nine months ended September 30, 2024.
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 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.
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, decreased to 21.7% for the three months ended September 30, 2024 as compared to 24.6% in the prior year period, and increased to 21.9% during the nine months ended September 30, 2024 as compared to 21.0% in the prior year period. The decrease for the three-month comparison was primarily driven by higher incentives in the current year period. The increase for the nine-month comparison was primarily driven by deliveries during the prior year period that carried higher incentives.
Previous 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.
Current wording
For the three and nine months ended September 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 23.6% and 23.5%, respectively, as compared to 25.8% and 22.3% 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 $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.
Current wording
Our selling, general and administrative expense increased $21.1 million and $57.7 million for the three and nine months ended September 30, 2024, respectively, as compared to the respective prior year periods. For both the three and nine-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 100 basis points and 80 basis points during the three and nine months ended September 30, 2024, respectively, 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 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%.
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 24.6%, 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.
Previous 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.
Current wording
For the nine months ended September 30, 2024, our estimated annual rate of 24.6% was benefitted by discrete items which had a net impact of decreasing our rate by 0.4%, including the impact of excess tax benefits for vested stock-based compensation.
Previous 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.
Current wording
For the three months ended September 30, 2024 and 2023, we recorded income tax expense of $26.9 million and $28.8 million, respectively. For the nine months ended September 30, 2024 and 2023, we recorded income tax expense of $73.8 million and $56.9 million, respectively.
Previous wording
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 wording
Total assets increased to $4.8 billion as of September 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 the timing of home and land development construction activities and an increase in the number of homes under construction.
Previous 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.
Current wording
During the nine months ended September 30, 2024, we continued to strategically increase our lot pipeline, including both organically and through acquisitions, resulting in 80,121 lots owned and controlled at September 30, 2024, compared to 73,720 at December 31, 2023. Of our total lots owned and controlled as of September 30, 2024, 44.5% were owned and 55.5% 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 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.
Current wording
Net new home contracts (new home contracts net of cancellations) for the three months ended September 30, 2024 increased by 414 homes, or 19.3%, to 2,563 as compared to 2,149 for the same period in 2023. Net new home contracts for the nine months ended September 30, 2024 increased by 1,721 homes, or 26.5%, to 8,209 as compared to 6,488 for the same period in 2023. These increases were primarily due to more homes available for sale, as well as favorable market conditions including a more recent moderation in mortgage interest rates.
Previous 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:
Current wording
Our overall monthly “absorption rate” (calculated as monthly net new home contracts divided by selling communities at period end) for the three and nine months ended September 30, 2024 and 2023 by segment are included in the tables below:
Previous 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.
Current wording
During the three months ended September 30, 2024 and 2023, our absorption rates remained consistent at 2.8 per month, respectively. Absorptions in our Texas segment during the three months ended September 30, 2024 were impacted by a partial period of operations from our Anglia acquisition, which occurred on July 31, 2024. During the nine months ended September 30, 2024, our absorption rates increased by 17.2% per month, as compared to the same respective period in 2023, driven by strong demand for new homes during the current period.
Previous 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.
Current wording
Our selling communities increased by 53 communities to 305 communities at September 30, 2024 as compared to 252 at September 30, 2023. This 21.0% increase was a result of an increased land pipeline that resulted in new community openings in excess of community closeouts during the first nine months of 2024, and includes our acquisition of Anglia, which added 26 new communities in our Texas segment as of September 30, 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 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.
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. As of September 30, 2024, we had 1,580 homes in backlog, which represents a decrease of 16.3% as compared to 1,887 homes in backlog at September 30, 2023, with a total value of $671.4 million, as compared to $707.2 million at September 30, 2023. Backlog dollar value decreased due to the decrease in the number of backlog units, and was partially offset by a 13.4% increase in the average sales price of backlog units, largely due to mix.
Previous 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.
Current wording
Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and revolving line of credit availability, was $605.9 million as of September 30, 2024 and $1.1 billion as of December 31, 2023.
Previous 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.
Current wording
Our principal uses of capital for the nine months ended September 30, 2024 were our land purchases, land development, home construction, the acquisition of Anglia and Landmark, 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, 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.
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 our purchases of land, as well as land development, home construction activities, and other cash needs. We had $414.0 million outstanding under our revolving line of credit as of September 30, 2024, as compared to no amounts outstanding as of December 31, 2023, which increase was primarily driven by increased community count and an increase in our investment in homes under construction during the period, as well as our acquisitions of Anglia and Landmark.
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 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.
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 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 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.
Current wording
In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future in addition to our outstanding debt obligations and debt service requirements described below. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three and nine months ended September 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 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.
Current wording
As of September 30, 2024, we had outstanding purchase contracts and option contracts for 44,435 lots totaling approximately $2.6 billion and we had $94.4 million of deposits for land contracts, of which $56.0 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 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.
Current wording
(2)As of September 30, 2024, other financing obligations included $14.5 million related to insurance premium notes and certain secured borrowings, as well as $110.3 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 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.
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 September 30, 2024 and December 31, 2023, we had $527.9 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 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.
Current wording
As of September 30, 2024, $110.3 million was outstanding under the construction loan agreements, with borrowings that bore a weighted average interest rate of 7.2% as of September 30, 2024, and we were in compliance with all covenants thereunder.
Previous 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.
Current wording
As of September 30, 2024, $414.0 million was outstanding under our revolving line of credit, with borrowings that bore an interest rate of 7.4%, 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 $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.
Current wording
Inspire is party to mortgage warehouse facilities with J.P. Morgan Chase Bank, N.A., U.S. Bank National Association and Truist Bank, which provide Inspire with uncommitted repurchase facilities of up to an aggregate of $475.0 million as of September 30, 2024, secured by the mortgage loans financed thereunder. The repurchase facilities have varying short term maturity dates through September 26, 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 6.8% as of September 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 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.
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 September 30, 2024 and December 31, 2023, we had $247.2 million and $239.3 million outstanding under the repurchase facilities, respectively, and were in compliance with all covenants thereunder.
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Previous report — wording carried elsewhere
Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states. In many of our projects, in addition to building homes, we entitle and develop the underlying land. We build and sell homes under our Century Communities and Century Complete brands.