Century Highlights Improved Construction Cycles in Q4
Century Communities reaped the benefits of an increased level of home starts earlier in 2023 and continued improvements of cycle times in its fourth quarter.
Fourth quarter deliveries increased 39% sequentially to a quarter-record 3,157 homes. For the full year, the No. 9 company on the BUILDER 100 list delivered 9,568 homes, down 9.7% from 2022.
“We saw meaningful improvement in our cycle times, deliveries, and earnings in the second half of 2023 as compared to the first, and are optimistic about the outlook for 2024, especially given the strong underlying demand that exists for affordable new homes,” chairman and co-CEO Dale Francescon said.
On the back of higher deliveries, fourth quarter revenues increased 36% quarter over quarter to $1.2 billion, the highest level since the fourth quarter of 2021. Co-CEO and president Robert Francescon said incentives on close homes increased to roughly 800 basis points in the fourth quarter, compared with 600 basis points in the third quarter.
“Interest rate buydowns continue to be the most important incentive for our customers given their ability to significantly lower monthly payments, a key focus for our entry-level buyers,” Robert Francescon said. “With the recent declines in interest rates, we’ve been able to pull back on our level of incentives on new orders in December and in January.”
The company reported fourth quarter profit of $91.3 million and profit per share of $2.83, an outperformance of Wall Street’s forecast of $2.27 per share. For the full year, profits were $259.2 million, or $8.05 per share, compared with $525.1 million, or $15.92 per share, in 2022.
Dale Francescon said the builder’s focus on affordability positions it well for future growth “as we can target the widest range of potential home buyers.” The company’s average sales price was $376,000 for 2023, while the Century Complete brand’s average sales price in the fourth quarter was $258,000.
Net new home contracts in the fourth quarter were 2,340—an 86% year-over-year improvement—while net new contracts for the full year was 8,828. At the end of the quarter, Century Communities had 1,070 homes in backlog representing a value of $400.8 million, compared with 1,810 homes representing $671.4 million at the end of the fourth quarter in 2022.
At quarter’s end, Robert Francescon said Century Communities improved its cycle time from start to completion to a “normal” four- to five-month time frame. The builder also reduced direct construction costs on homes started in the quarter by 1% on a sequential basis in the fourth quarter.
Century Communities ended the fourth quarter with approximately 74,000 owned and controlled lots, an 8% sequential improvement and a 39% year-over-year increase. Robert Francescon said the increase was driven by an increase in controlled lots, which accounts for 59% of total lots in the fourth quarter.
Expansion Through Acquisition
Dale Francescon highlighted its acquisition of Landmark Homes of Tennessee on the company earnings call, noting it will expand the builder’s presence in the greater Nashville market through the addition of six active communities. He said the transaction provides Century Communities with a pipeline of controlled lots and furthers the builder’s goal of increasing market share “throughout and beyond” its current 18-state geographic footprint.
“We look at M&A at this point as really opportunistic abilities to enhance our organic portfolio of land,” Dale Francescon said. “In terms of voids in our market, the only ones that we have is a higher presence within Florida. We’re there throughout Florida in our Century Complete brand, but on our [Century] Communities brand, we’re only in Jacksonville. Our experience has been very positive [in Florida], and we’d like to expand our presence there; M&A would be one way to do that.”