Century Communities Reports Third Quarter 2016 Results

Century Communities, Inc. (NYSE:CCS), a top-25 U.S. homebuilder of single-family homes, townhomes and flats in select markets, today announced financial results for its third quarter ending September 30, 2016.

Third Quarter 2016 Highlights Compared to Third Quarter 2015
  • Net income increased 26% to $13.3 million or $0.63 per share
  • Pre-tax income grew 24% to $19.7 million
  • Home sales revenues rose 38% to $248.1 million
  • Home deliveries increased 22% to 706 homes
  • Adjusted homebuilding gross margin expanded 36% to $55.7 million
  • Adjusted EBITDA was up 33% to $26.4 million
  • Net new home contracts increased 32% to 628 contracts
  • Backlog dollar value improved 17% to $380.9 million
  • Expanded senior unsecured credit facility to $380 million and extended its maturity date to 2019
  • Commenced a new wholly-owned financing division to provide title and mortgage services

"We are on track to deliver another year of record profits with earnings of $1.63 per share for the first nine months of 2016," stated Dale Francescon, Co-Chief Executive Officer of the Company. "Our diversified product offerings combined with our carefully selected markets continue to provide profitable growth for the Company. This dynamic is evidenced by the significant expansion in deliveries and revenues which drove a 33% increase in Adjusted EBITDA during the third quarter of 2016. Furthermore, we experienced healthy demand trends with our absorption pace improving by 15% during the quarter. As a result, we ended the quarter with a very strong backlog in dollar value, an increase of 17.3% from the prior year quarter, which positions us well into the final quarter of 2016."

Rob Francescon, Co-Chief Executive Officer of the Company, stated, "Our progress during 2016 has been entirely organic and a reflection of our disciplined efforts to expand operations into good markets with sound long term fundamentals. That said, we remain committed to enhancing returns on equity by investing wisely in attractive opportunities. With our recently started financing division, we will be able to provide a more complete service offering to our home buyers while generating incremental earnings."

Third Quarter 2016 Results

Net income for the third quarter 2016 was $13.3 million, or $0.63 per share, compared to $10.6 million, or $0.50 per share, for the prior year quarter. The improvement in net income was primarily attributable to an increase in home sales revenues and homebuilding gross margin.

Home sales revenues for the third quarter 2016 were $248.1 million, compared to $179.8 million for the prior year quarter. The growth in home sales revenues was primarily due to an increase in homes delivered to 706, compared to 578 in the prior year quarter, and a higher average selling price of homes delivered, increasing to $351,400, compared to $311,000 in the prior year quarter. The increase in average selling prices was largely due to a shift in regional and product mix.

Homebuilding gross margin percentage in the third quarter 2016 was 20.3%, as compared to 21.3% in the prior year quarter. Adjusted homebuilding gross margin percentage, excluding interest and purchase price accounting in cost of homes sales revenues, was 22.5%, compared to 22.8% in the prior year quarter, largely due to product and geographical mix. Adjusted homebuilding gross margin percentage increased 140 basis points compared to the second quarter 2016. SG&A as a percent of home sales revenues was 12.5% compared to 12.3% in the prior year quarter, mainly as a result of higher sales and marketing expense to support significant growth in net new home contracts.

Net new home contracts in the third quarter 2016 increased to 628 homes, an increase of 31.7%, compared to 477 homes in the prior year quarter, largely attributable to stronger demand trends in most divisions, driving an overall increase in absorption rates. At the end of the third quarter 2016, the Company had 992 homes in backlog, representing $380.9 million of backlog dollar value, compared to 904 homes, representing $325.1 million of backlog dollar value in the prior year quarter. At the end of the third quarter 2016, the Company had 87 open communities, compared to 88 open communities at the end of the prior year quarter.

Balance Sheet and Liquidity

In August 2016, the Company announced an expansion of its senior unsecured credit facility to $380 million at an unchanged interest rate of LIBOR plus a spread of 2.75% to 3.25%, depending on the Company's leverage ratio. The term of the credit facility was extended by one year to mature in October 2019. As of September 30, 2016, the Company had $190.0 million of availability under the credit facility.

As of September 30, 2016, the Company had total assets of $1.0 billion and inventories of $873.6 million. Liabilities totaled $555.8 million, which included $450.3 million of long-term debt.

Financial Services

During the third quarter, the Company's wholly-owned subsidiary, Parkway Financial Group LLC., formed Inspire Home Loans ("Inspire"), which will provide mortgage services to its homebuyers. Inspire is currently beginning to hire employees and start the licensing process in each of the Company's markets. In addition to Inspire, Parkway Title LLC will provide title services to select markets in which the Company operates.

Full Year 2016 Outlook

David Messenger, Chief Financial Officer of the Company, commented, "We are encouraged by the pace of activity in our communities year to date. Based on our current market outlook, we expect home deliveries to be in the range of 2,700 to 2,900 homes and our home sales revenues to be in the range of $900 million to $1.0 billion. We continue to expect our active selling community count to be in the range of 85 to 90 communities at the end of the full year 2016."

Conference Call

The Company will host a webcast and conference call on Tuesday, November 1, 2016 at 5:00 p.m. Eastern time, 3:00 p.m. Mountain time, to review the Company's third quarter 2016 results, discuss recent events and conduct a question-and-answer period. To participate in the call, please dial 877-705-6003 (domestic) or 201-493-6725 (international). The live webcast will be available at www.centurycommunities.com in the Investors section. A replay of the conference call will be available through December 1, 2016, by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the pass code 13645573.

About Century Communities

Founded in 2002, Colorado-based Century Communities is a builder of single-family homes, townhomes and flats in select major metropolitan markets in Colorado, Georgia, Nevada, Texas, and Utah. The Company offers a wide variety of product lines and is engaged in all aspects of homebuilding, including the acquisition, entitlement and development of land and the construction, marketing and sale of homes. Century Communities is a top-25 U.S. homebuilder based on homes delivered. To learn more about Century Communities please visit www.centurycommunities.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on historical information available at the time the statements are made and are based on management's reasonable belief or expectations with respect to future events, and are subject to risks and uncertainties, many of which are beyond the Company's control, that could cause actual performance or results to differ materially from the belief or expectations expressed in or suggested by the forward-looking statements. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Investors are referred to the Company's Annual Report on Form 10-K for additional information regarding the risks and uncertainties that may cause actual results to differ materially from those expressed in any forward-looking statement.
 

Century Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)
   

(in thousands, except share and per share amounts)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016   2015 2016   2015
Revenue
Home sales revenues $ 248,075 $ 179,775 $ 686,335 $ 520,918
Land sales revenues 4,651 2,257 7,909 2,627
Golf course and other revenue   687     700     2,907     4,679  
Total revenue 253,413 182,732 697,151 528,224
Costs and expenses
Cost of home sales revenues 197,650 141,452 549,886 416,483
Cost of land sales revenues 4,255 2,250 6,668 2,615
Cost of golf course and other revenue 1,165 1,046 2,765 4,214
Selling, general, and administrative   30,944     22,175     87,512     65,919  
Total operating costs and expenses   234,014     166,923     646,831     489,231  
Operating income 19,399 15,809 50,320 38,993
Other income (expense):
Interest income 61 51 142 88
Interest expense (2 ) (4 ) (8 )
Acquisition expense (53 ) (323 ) (466 ) (338 )
Other income 179 434 797 1,059
Gain on disposition of assets   145     (24 )   468     106  
Income before income tax expense 19,731 15,945 51,257 39,900
Income tax expense   6,389     5,362     16,790     13,168  
Net income $ 13,342   $ 10,583   $ 34,467   $ 26,732  
 
Earnings per share:
Basic $ 0.63 $ 0.50 $ 1.63 $ 1.26
Diluted $ 0.63 $ 0.50 $ 1.63 $ 1.26
Weighted average common shares outstanding:
Basic 20,673,521 20,601,218 20,652,533 20,556,146
Diluted 20,822,066 20,601,218 20,740,781 20,556,146
 
 

Century Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)
 

(in thousands, except share amounts)
  September 30,   December 31,
2016 2015
Assets
Cash and cash equivalents $ 17,354 $ 29,287
Cash held in escrow 27,749 11,817
Accounts receivable 4,852 5,241
Inventories 873,613 810,137
Prepaid expenses and other assets 38,421 26,735
Property and equipment, net 11,228 8,375
Deferred tax asset, net 3,533
Amortizable intangible assets, net 3,256 4,784
Goodwill   21,365   21,365
Total assets $ 1,001,371 $ 917,741
Liabilities and stockholders' equity
Liabilities:
Accounts payable $ 18,139 $ 10,967
Accrued expenses and other liabilities 87,305 106,777
Deferred tax liability, net 275
Notes payable and revolving line of credit   450,331   390,243
Total liabilities   555,775   508,262
Stockholders' equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none outstanding
Common stock, $0.01 par value, 100,000,000 shares authorized, 21,043,563 and 21,303,702 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively 210 213
Additional paid-in capital 342,606 340,953
Retained earnings   102,780   68,313
Total stockholders' equity   445,596   409,479
Total liabilities and stockholders' equity $ 1,001,371 $ 917,741
 
 

Century Communities, Inc.

Homebuilding Operational Data
                       

Net New Home Contracts
 
Three Months Ended Nine Months Ended
September 30, September 30,
 
2016 2015 % Change 2016 2015 % Change
Atlanta 281 246 14.2 % 1,036 906 14.3 %
Central Texas 62 30 106.7 % 181 142 27.5 %
Colorado 136 125 8.8 % 596 555 7.4 %
Houston 19 21

(9.5

)
% 90 85 5.9 %
Nevada 122 55 121.8 % 378 213 77.5 %
Utah 8 NM     10 NM  
Total 628 477 31.7   % 2,291 1,901 20.5 %

NM - Not meaningful
 

Home Deliveries
           
 

(dollars in thousands)
 
Three Months Ended September 30,
2016 2015 % Change
Homes

Average Sales Price
Homes

Average Sales Price
Homes

Average Sales Price
Atlanta 298 $ 276.3 269 $ 227.4 10.8 % 21.5 %
Central Texas 40 446.9 34 497.9 17.6 % (10.2) %
Colorado 213 447.3 143 423.5 49.0 % 5.6 %
Houston 24 312.9 35 267.3 (31.4) % 17.1 %
Nevada 130 343.9 97 327.3 34.0 % 5.1 %
Utah 1   366.5      
Total / Weighted Average 706 $ 351.4 578 $ 311.0 22.1 % 13.0 %
 
Nine Months Ended September 30,
2016 2015 % Change
Homes

Average Sales Price
Homes

Average Sales Price
Homes

Average Sales Price
Atlanta 907 $ 261.7 843 $ 223.1 7.6 % 17.3 %
Central Texas 154 439.4 109 459.9 41.3 % (4.5) %
Colorado 590 444.3 473 405.3 24.7 % 9.6 %
Houston 98 312.3 127 211.4 (22.8) % 47.7 %
Nevada 263 335.5 204 314.6 28.9 % 6.6 %
Utah 1   366.5      
Total / Weighted Average 2,013 $ 341.0 1,756 $ 296.7 14.6 % 14.9 %
 
 

Century Communities, Inc.

Homebuilding Operational Data
           

Selling Communities
 
September 30,

   2016   

   2015   
% Change
Atlanta 29 33 (12.1) %
Central Texas 15 12 25.0 %
Colorado 24 29 (17.2) %
Houston 8 9 (11.1) %
Nevada 10 5 100.0 %
Utah 1 NM  
Total 87 88 (1.1) %

NM - Not meaningful
 

Backlog
 

(dollars in thousands)
                 
September 30,
2016 2015 % Change
Homes Dollar Value

Average Sales Price
Homes Dollar Value

Average Sales Price
Homes Dollar Value

Average Sales Price
Atlanta 412 $ 123,224 $ 299.1 386 $ 97,992 $ 253.9 6.7 % 25.7 % 17.8 %
Central Texas 136 66,073 485.8 124 57,933 467.2 9.7 % 14.1 % 4.0 %
Colorado 268 126,321 471.3 300 138,153 460.5 (10.7) % (8.6) % 2.3 %
Houston 23 8,025 348.9 52 15,439 296.9 (55.8) % (48.0) % 17.5 %
Nevada 144 53,986 374.9 42 15,614 371.8 242.9 % 245.8 % 0.8 %
Utah 9   3,298   366.5     NM   NM   NM  
Total / Weighted Average 992 $ 380,926 $ 384.0 904 $ 325,131 $ 359.7 9.7 % 17.2 % 6.8 %

NM - Not meaningful
 

Lot Inventory
                 
September 30,
2016 2015 % Change
 
Owned Controlled Total Owned Controlled Total Owned Controlled Total
 
Atlanta 2,964 2,695 5,659 2,171 3,584 5,755 36.5 % (24.8) % (1.7) %
Central Texas 1,275 1,427 2,702 1,218 358 1,576 4.7 % 298.6 % 71.4 %
Colorado 2,861 1,684 4,545 3,102 904 4,006 (7.8) % 86.3 % 13.5 %
Houston 160 1,140 1,300 306 192 498 (47.7) % 493.8 % 161.0 %
Nevada 1,696 89 1,785 1,962 1,962 (13.6) % NM (9.0) %
Utah 84 1,128 1,212 NM   NM   NM  
Total 9,040 8,163 17,203 8,759 5,038 13,797 3.2 % 62.0 % 24.7 %

NM - Not meaningful
 
       

Century Communities, Inc.

Earnings Per Share

(Unaudited)
 

(in thousands, except share and per share amounts)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Numerator
Net income $ 13,342 $ 10,583 $ 34,467 $ 26,732
Less: Undistributed earnings allocated to participating securities   (241 )   (358 )   (738 )   (890 )
Net income allocable to common stockholders $ 13,101   $ 10,225   $ 33,729   $ 25,842  
Denominator
Weighted average common shares outstanding - basic 20,673,521 20,601,218 20,652,533 20,556,146
Dilutive effect of restricted stock units   148,545       88,248    
Weighted average common shares outstanding - diluted   20,822,066     20,601,218   20,740,781   20,556,146  
Earnings per share:
Basic $ 0.63 $ 0.50 $ 1.63 $ 1.26
Diluted $ 0.63 $ 0.50 $ 1.63 $ 1.26
 
 

Century Communities, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)
 
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory is not a measurement of financial performance under United States generally accepted accounting principles; however, the Company's management believes that this information is meaningful as it isolates the impact that indebtedness and acquisitions have on homebuilding gross margin and permits the Company's stockholders to make better comparisons with the Company's competitors, who adjust gross margins in a similar fashion. This non-GAAP financial measure should not be used as a substitute for the Company's operating results. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
 

Gross Margin from Home Sales Excluding Interest and Purchase Price Accounting for Acquired Work in Process Inventory
       

(in thousands)
Three Months Ended September 30,
2016 % 2015 %
 
Home sales revenues $ 248,075 100.0 % $ 179,775 100.0 %
Cost of home sales revenues   197,650 79.7 %   141,452 78.7 %
Gross margin from home sales 50,425 20.3 % 38,323 21.3 %
Add: Interest in cost of home sales revenues   5,192 2.1 %   2,474 1.4 %
Adjusted homebuilding gross margin excluding interest 55,617 22.4 % 40,797 22.7 %
Add: Purchase price accounting for acquired work in process inventory   100 0.0 %   204 0.1 %
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory $ 55,717 22.5 % $ 41,001 22.8 %
 
 
Nine Months Ended September 30,
2016 % 2015 %
 
Home sales revenues $ 686,335 100.0 % $ 520,918 100.0 %
Cost of home sales revenues   549,886 80.1 %   416,483 80.0 %
Gross margin from home sales 136,449 19.9 % 104,435 20.0 %
Add: Interest in cost of home sales revenues   13,177 1.9 %   6,925 1.3 %
Adjusted homebuilding gross margin excluding interest 149,626 21.8 % 111,360 21.4 %
Add: Purchase price accounting for acquired work in process inventory   318 0.0 %   2,645 0.5 %
Adjusted homebuilding gross margin excluding interest and purchase price accounting for acquired work in process inventory $ 149,944 21.8 % $ 114,005 21.9 %
 
 

Century Communities, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)
 

Adjusted EBITDA
 
Adjusted EBITDA is a non-GAAP financial measure we use as a supplemental measure in evaluating operating performance. We define adjusted EBITDA as consolidated net income before (i) income tax expense, (ii) interest in cost of home sales revenues, (iii) other interest expense, (iv) depreciation and amortization expense, and (v) adjustments resulting from the application of purchase accounting for acquired work in process inventory related to business combinations. We believe adjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, and items considered to be non-recurring. Accordingly, our management believes that this measurement is useful for comparing general operating performance from period to period. Adjusted EBITDA should be considered in addition to, and not as a substitute for, consolidated net income in accordance with GAAP as a measure of performance. Our presentation of adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or non-recurring items. Our adjusted EBITDA is limited as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
 

(in thousands)
               
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 % Change 2016 2015 % Change
Net income $ 13,342 $ 10,583 26.1 % $ 34,467 $ 26,732 28.9 %
Income tax expense 6,389 5,362 19.2 % 16,790 13,168 27.5 %
Interest in cost of home sales revenues 5,192 2,474 109.9 % 13,177 6,925 90.3 %
Interest expense 2 (100.0) % 4 8 (50.0) %
Depreciation and amortization expense   1,418   1,242   14.2 %   4,215   3,512   20.0 %
EBITDA 26,341 19,663 34.0 % 68,653 50,345 36.4 %
Purchase price accounting for acquired work in process inventory   100   204   (51.0) %   318   2,645   (88.0) %
Adjusted EBITDA $ 26,441 $ 19,867   33.1 % $ 68,971 $ 52,990   30.2 %
 
 

Century Communities, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited)
 

Net Debt to Net Capital
 
The following table presents our ratio of net debt to net capital, which is a non-GAAP financial measure. We calculate this by dividing net debt (notes payable and revolving line of credit less cash held in escrow and cash and cash equivalents) by net capital (net debt plus total stockholders' equity). The most directly comparable GAAP measure is the ratio of debt to capital. The Company believes the ratio of net debt to net capital is a relevant and useful financial measure to investors in understanding the leverage employed in its operations and as an indicator of the Company's ability to obtain external financing.
 

(in thousands)
       
September 30, December 31,
2016 2015
Notes payable and revolving line of credit $ 450,331 $ 390,243
Total stockholders' equity   445,596     409,479  
Total capital $ 895,927   $ 799,722  
Debt to capital  

50.3%

 
 

48.8%

 
 
Notes payable and revolving line of credit $ 450,331 $ 390,243
Cash held in escrow (27,749 ) (11,817 )
Cash and cash equivalents   (17,354 )   (29,287 )
Net debt 405,228 349,139
Total stockholders' equity   445,596     409,479  
Net capital $ 850,824   $ 758,618  
 
Net debt to net capital  

47.6%

 
 

46.0%

 

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