Century Communities, Inc. — Q2 2021 Form 10-Q
Business context and period. Century Communities develops and sells single-family homes in 17 states through its Century Communities and Century Complete brands, and provides mortgage, title, and insurance services. This filing covers the three and six months ended June 30, 2021; comparisons are with the same 2020 periods unless noted.
Key financial and operating results
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Total revenue | $1.043 billion | $776.4 million | $2.051 billion | $1.379 billion |
| Income before tax | $152.1 million | $50.1 million | $283.2 million | $84.2 million |
| Net income | $117.9 million | $38.5 million | $219.6 million | $64.6 million |
| Diluted EPS | $3.47 | $1.15 | $6.47 | $1.93 |
| Operating cash flow | Not presented by quarter | $143.4 million | $173.8 million |
Revenue increased 34.3% in Q2 and 48.8% in the first half; net income increased 206.7% and 240.0%, respectively. Homebuilding gross margin was 23.9% in Q2 and 22.5% in the first half, versus 16.9% and 17.2%. SG&A declined as a share of home sales revenue to 9.9% in Q2 and 9.8% in the first half, from 11.6% and 12.1%.
Deliveries were 2,771 homes in Q2 and 5,568 in the first half, up 11.7% and 28.2%. Average delivered home prices rose to $362,600 in Q2 and $352,700 in the first half. Net new contracts rose 17.1% in Q2 and 30.1% in the first half. Period-end backlog was 4,446 homes valued at $1.763 billion, up 60.0% in units and 83.1% in value year over year.
Results strengthened across the West, Mountain, Texas, Southeast, and Century Complete homebuilding segments. The Southeast had fewer Q2 deliveries and contracts year over year, while Financial Services pretax income declined in Q2 to $11.7 million from $13.0 million; first-half Financial Services pretax income rose to $27.0 million from $13.2 million.
Liquidity, debt, and capital
At June 30, 2021, cash and cash equivalents were $419.4 million, cash held in escrow was $37.6 million, and total assets were $2.894 billion. The company reported $901.3 million of notes payable, including senior notes due 2025 and 2027, and $159.8 million outstanding under mortgage repurchase facilities. Total debt was $1.061 billion; no amount was drawn on its revolving credit facility.
Cash and restricted cash increased by $26.6 million during the first half. Operating cash flow was $143.4 million, down from $173.8 million, primarily because of increased investment in homebuilding inventories despite substantially higher net income. Financing activities used $112.5 million, including net repayments of mortgage repurchase facilities. Net homebuilding debt to net capital was 23.0%, versus 27.2% at December 31, 2020.
In May, the company amended its senior unsecured revolving facility, increasing capacity to $800 million and extending maturity to April 2026. It initiated a quarterly dividend and paid $0.15 per share, totaling $5.1 million. No shares were repurchased during the period.
Outlook, risks, and notable items
The filing gives no specific full-year financial guidance. Management described demand and sales trends as strong and said higher selling prices had helped offset rising labor and material costs. It also reported continued supply-cost pressures that could weigh on future margins. Management said it believed liquidity was sufficient to operate and pursue growth, while noting that future access to capital is not assured.
Risks highlighted include uncertainty around COVID-19 and housing demand, mortgage-rate and credit-market changes, inflation and higher lumber, labor, and land costs, construction or land-development delays, and warranty, product-liability, regulatory, and legal matters. Management said ordinary-course litigation was not expected to materially affect results. Outstanding letters of credit and performance bonds totaled $464.6 million. Purchase and option contracts covered 43,049 lots with an aggregate purchase price of approximately $1.7 billion; related nonrefundable option deposits were $35.2 million.
Other notable items: warranty reserve reductions were $2.2 million in the first half; inventory impairment was nominal, compared with $1.7 million in the first half of 2020. Management reported effective disclosure controls and no material changes to internal control over financial reporting.
Investor facts to verify
- Whether homebuilding margins can hold up as labor and materials remain costly and supply-constrained.
- Whether backlog converts to deliveries and cash generation on expected timing, and whether demand remains strong across regions, particularly the Southeast.
- Cash conversion and inventory investment, given first-half operating cash flow declined despite sharply higher earnings.
- Debt, mortgage repurchase facility usage, and the company’s ability to fund its expanded land pipeline and contractual lot commitments.
- Any subsequent developments in COVID-19, mortgage rates, housing affordability, warranty claims, or other contingencies that could change the stated outlook.