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| Statement |
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| Given the continued strength in our deliveries, which have benefited from improved cycle times and the continued sales pace, we are increasing the mid points of our full year 2023 guidance for home deliveries to be in the range of 8,600 to 9,000 homes and our home sales revenues to be in the range of $3.2 billion to $3.4 billion |
| Given the market demand, we were able to reduce our level of incentives while still maintaining a healthy sales pace in the quarter |
| Some of the markets Dale alluded to on this call, and we feel really good about them |
| As a result, we think Century Complete is in a strong position to capture additional market share in the years ahead |
| Despite rising interest rates, our sales activity performed in line with our expectations and typical seasonality, demonstrating the strong underlying demand that remains for affordable new homes |
| Our deliveries of 2,264 homes increased on a quarter-over-quarter basis and benefited from improved cycle times |
| Home sales revenues of $865 million grew by 6% over second quarter levels, with our average sales price gaining 4% |
| So I think on the fixed dollars, we feel good about that and then obviously the variable's going to flow as we see closings come through the pipeline |
| As expected, our gross margins increased sequentially in the third quarter due to improved cycle times, lower direct costs, and reduced levels of incentives |
| Our net new contracts in the third quarter totaled 2,149 homes, a 63% improvement over the level of sales activity that we saw in the third quarter 2022 |
| Our net orders in August and September both exceeded the levels we experienced in July, which we view as a positive trend given the continued increase in interest rates over the past several months |
| We are continuing to see good demand for affordable entry-level homes across both our Century Communities and Century Complete brands, and wanted to use this opportunity to go into a little more detail on the value that we see in our Century Complete business, which currently generates approximately 35% of our sales and deliveries |
| So it's kind of an all across the board structure on the land, but we feel really good about the control positions we have |
| During the quarter, we maintained our quarterly cash dividend at $0.23 per share and ended the quarter with a strong financial position, including $2.3 billion in stockholders equity, $1 billion in total liquidity, and $246 million in cash |
| We've been successful in purchasing lots from those entities |
| But again, it's off this higher base, which we feel really good about that and that's why we're anticipating to have higher deliveries in 2024 than we did in -- are going to have in 2023 |
| I want to start by saying that we are very pleased with our solid third quarter results, especially within the context of a challenging overall housing market |
| We expect our cycle times to see some additional improvement in the fourth quarter, such that by the end of the year we are back to starting and completing homes in the more normalized four to six month timeframe |
| The increase in interest rates over the past year has also reinforced some additional advantages of the Century Complete brand |
| We continue to believe that our cancellation rate is benefiting from buyers adjusting to the higher interest rate environment and our strategy of selling homes later in the construction cycle |
| In closing, we're encouraged by the improvement that we have seen over the past several quarters in our deliveries and gross margins, which are benefiting from reduced levels of incentives, improve cycle times and lower direct costs |
| We experience further improvement in our cycle times on completed homes in the third quarter, which generally averaged in the five to six month timeframe |
| The sequential improvement in our margins and deliveries this year, coupled with the increase in our community counts, which Rob will discuss further in his remarks, position us well for 2024 |
| But obviously all four really contributed to some great gross margin performance we had this quarter that we could talk about |
| Century Complete accounted for over 40% of our total community count, while the Southeast and Texas combined accounted for close to 30% as these markets are continuing to perform well, given their relative affordability and strong employment and population growth |
| We think that we're well positioned, we're well positioned today that if -- call it a 250 to 260 community account going into next year, given our current sales basis, we feel good about being able to deliver those homes |
| However, given the ability to significantly lower monthly payments, a below market interest rate provides us a significant sales tool that continues to be one of the most sought after incentive by our homebuyers and allows us a competitive advantage over private builders that can't compete on this front |
| It's just -- those markets have benefited more from having lower price points in general, more in migration, stronger economies |
| Our gross margins increased by 490 basis points sequentially to 24.6%, while our adjusted gross margins increased by 480 basis points to 25.8% |
| Additionally, we have no senior debt maturities until June of 2027, providing us ample flexibility with our leverage management |
| Statement |
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| For the fourth quarter, we expect our gross margins to decline versus third quarter 2023 levels primarily due to the increased cost of mortgage rate buydowns |
| We commented last quarter that we expected more typical seasonality to return this year, and we saw it play out in the third quarter with our net orders declining 7% sequentially, roughly in line with the 6% quarter-over-quarter decline we saw in the third quarter of 2019 |
| Incentives averaged roughly 700 basis points on closed homes in the third quarter 2023, down roughly 200 basis points on a sequential basis |
| Our cancellation rate last quarter was 16%, which is consistent with where we had been running, down quite a bit from what we were experiencing pre-COVID in the low to mid 20% range |
| Looking out to the fourth quarter as a whole, if typical seasonality holds, we would expect our net orders to decline on a sequential basis |
| They're not able to compete |
| Alex Rygiel And then, looking at the communities again, Century Complete communities are down year-over-year |
| So if I add that all up, the change in gross margin from third quarter to fourth quarter should be relatively modest on a negative basis |
| We expect that to certainly start slowing down |
| Existing home inventories remain depressed due to the lock-in effect, so there is less competition from the used home market |
| My other question was, last year, I think several builders engaged in trying to find the market clearing price, and obviously that had an impact on margins |
| Our cancellation rate was 16% in the third quarter, consistent with our year-to-date rate and well below an average cancellation rate in the low to mid 20% range in the years prior to COVID |
| And also some of that's timing differences as well because just as a reminder, Century Complete only buys finished lots, and so sometimes there may be delays on a developer bringing the lots to us from a cycle time |
| And so there could just be certain mixed delays within these, within a particular point in time |
| David Messenger That's really tough to forecast in terms of where that mortgage market is going to be in terms of buydowns |
| But the comment is really we think that SG&A as percent of revenues is going to decline on a year-over-year basis as we're looking to grow our deliveries next year |
| Jay McCanless And then Dave, I think you said that you guys are expecting the SG&A margin, SG&A to sales margin in 2024 to kind of flatten out |
| Just given how impressive orders were this quarter and the entry level exposure, I'm curious how cancellation rates have stayed so low |
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