Century Communities, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied filing does not provide a clear standalone fourth-quarter financial results summary.
Business context
Century Communities develops and sells single-family homes across 18 states under its Century Communities and Century Complete brands. Its operations include five homebuilding segments, mortgage, title and insurance services, and a Colorado multifamily rental business. In 2023, it delivered 9,568 homes; approximately 92% were to entry-level buyers and 99% were move-in ready.
Financial and operating metrics
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Total revenue | $3.692 billion | $4.506 billion |
| Homebuilding revenue | $3.612 billion | $4.410 billion |
| Income before income taxes | $350.8 million | $676.9 million |
| Net income | $259.2 million | $525.1 million |
| Diluted EPS | $8.05 | $15.92 |
| Homebuilding gross margin | 21.2% | 24.5% |
| Operating cash flow | $41.6 million | $315.3 million |
| Cash and cash equivalents | $226.2 million | $296.7 million |
| Total debt | $1.302 billion | $1.217 billion |
Net cash used in investing activities was $132.0 million, largely reflecting $88.5 million of multifamily development spending; financing activities provided $23.9 million. Reported liquidity was approximately $1.1 billion, including cash, cash held in escrow and availability under the $800 million revolving credit facility, which had no borrowings at year-end. Net homebuilding debt to net capital, a non-GAAP measure, was 22.4%, versus 23.5%.
Homes delivered fell 9.7% to 9,568, and average selling price declined 9.2% to $376,700. Net new home contracts rose 13.9% to 8,828; the cancellation rate improved to 16.6% from 24.0%. Year-end backlog declined 40.9% to 1,070 homes, valued at $400.8 million. Owned and controlled lots increased 38.8% to 73,720, with 58.5% controlled through options.
Changes versus prior year
- Total revenue declined 18.1%; net income fell 50.6% and diluted EPS fell 49.4%.
- Gross margin contracted 3.3 percentage points. Management attributed pressure principally to higher sales incentives, including price discounts and mortgage rate buydowns.
- SG&A increased 3.8% to $447.3 million and rose to 12.4% of home sales revenue from 9.8%, reflecting compensation, higher community count, commissions and lower revenue against partly fixed costs.
- Operating cash flow dropped substantially, with lower earnings and a $45.7 million increase in mortgage loans held for sale among the cited drivers.
- Inventory impairment charges decreased to $1.9 million from $10.1 million. Financial Services revenue declined 15.9% to $80.2 million; the segment reported a $13.7 million net loss on mortgage loan sales, compared with gains in 2022.
Outlook, risks and notable items
- Management said it expects to fund foreseeable liquidity needs for at least the next 12 months, but noted that future capital availability and terms are uncertain. It cited affordable-home demand and limited new and resale supply as supportive, while emphasizing uncertainty around rates, inflation, mortgage access and the broader economy. The filing provides no quantitative earnings or delivery guidance in the supplied text.
- Debt includes $500 million of 6.750% senior notes due 2027 and $500 million of 3.875% senior notes due 2029. The $239.3 million mortgage repurchase balance is under facilities with maturities through December 18, 2024; renewal is expected but not assured. The $800 million revolver matures in 2026. The company reported covenant compliance at year-end.
- Key risks include mortgage-rate and affordability changes, construction and labor costs, land values and inventory impairments, weather and insurance availability in some markets, regulatory and environmental constraints, warranty and construction-defect claims, and refinancing and liquidity risk. The self-insurance reserve for incurred-but-not-reported construction defect claims was $23.7 million, up from $17.0 million.
- Stock-based compensation expense included a $14.5 million cumulative catch-up adjustment related to revised expected performance-unit vesting. The company also spent $19.2 million on share repurchases and paid $0.92 per share in dividends during 2023; future dividends and buybacks are discretionary and subject to debt restrictions.
- Century Living was developing three Colorado multifamily projects totaling more than 900 units; part of the first property began leasing in the second half of 2023, with remaining projects expected to become available in 2024. The acquisition of substantially all assets of Landmark Homes of Tennessee closed on January 22, 2024, after year-end.
- Management said ordinary-course legal matters were not expected to materially affect the company. The auditor gave an unqualified opinion on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Whether improved orders and cancellations translate into deliveries and backlog rebuilding, and whether incentives continue to weigh on margins.
- How operating cash flow develops relative to earnings, inventory investment and mortgage loans held for sale.
- Renewal terms and availability for mortgage repurchase facilities maturing in 2024, and progress toward the 2027 senior-note maturity.
- Whether land pipeline growth, option takedowns and the multifamily build-out earn acceptable returns without increasing impairment or liquidity pressure.
- Assumptions behind construction-defect self-insurance reserves, warranty accruals and inventory valuations, as well as the financial effects of the Landmark acquisition.