CENTURY COMMUNITIES, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)
Some of the statements included in this Quarterly Report on Form 10-Q (which we refer to as this "Form 10-Q") constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events and results of operations could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "will," "should," "expect," "could," "intend," "plan," "anticipate," "estimate," "believe," "continue," "predict," "potential," the negative of such terms and other comparable terminology and the use of future dates. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors. The forward-looking statements included in this Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. Statements regarding the following subjects, among others, may be forward-looking and subject to risks and uncertainties including among others: ?the impact of the COVID-19 pandemic and measures taken in response to the COVID-19 pandemic on our business operations, operating results and financial condition, as well as the general economy and housing market in particular; ?economic changes, either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation; ?shortages of or increased prices for labor, land or raw materials, including lumber, used in housing construction and resource shortages; ?a downturn in the homebuilding industry, including a reduction in demand or a decline in real estate values or market conditions resulting in an adverse impact on our business, operating results and financial conditions, including an impairment of our assets; ?changes in assumptions used to make industry forecasts, population growth rates or trends affecting housing demand or prices; ?continued volatility and uncertainty in the credit markets and broader financial markets; ?our future operating results and financial condition; ?our business operations; ?changes in our business and investment strategy; ?availability and price of land to acquire, and our ability to acquire such land on favorable terms or at all; ?availability, terms and deployment of capital; ?availability or cost of mortgage financing or an increase in the number of foreclosures in the market; ?delays in land development or home construction resulting from adverse weather conditions or other events outside our control; ?impact of construction defect, product liability, and/or home warranty claims, including the adequacy of accruals and the applicability and sufficiency of our insurance coverage; ?changes in, or the failure or inability to comply with, governmental laws and regulations; ?the timing of receipt of regulatory approvals and the opening of projects; ?the impact and cost of compliance with evolving environmental, health and safety and other laws and regulations and third-party challenges to required permits and other approvals and potential legal liability in connection therewith; ?the degree and nature of our competition; ?our leverage, debt service obligations and exposure to changes in interest rates and our ability to refinance our debt when needed or on favorable terms; ?our ability to continue to fund and succeed in our mortgage lending business and the additional risks involved in that business; ?availability of qualified personnel and contractors and our ability to retain key personnel and contractor relationships; ?our ability to pay dividends in the future; ?taxation and tax policy changes, tax rate changes, new tax laws, new or revised tax law interpretations or guidance; and ?changes inUnited States generally accepted accounting principles (which we refer to as "GAAP"). Forward-looking statements are based on our beliefs, assumptions and expectations of future events, taking into account all information currently available to us. Forward-looking statements are not guarantees of future events or of our performance. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these events and factors are described above and in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K, and other risks and uncertainties detailed in this report, including "Part II, Item 1A. Risk Factors", and our other reports and filings with theSEC . If a change occurs, our business, financial condition, liquidity, cash flows and results of operations may vary materially from those expressed in or implied by our forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or 16
————————————————– ——————————
Contents
revise any forward-looking statements, whether as a result of new information, future events or otherwise. Therefore, you should not rely on these forward-looking statements as of any date subsequent to the date of this Form 10-Q. As used in this Form 10-Q, references to "we," "us," "our," "Century" or the "Company" refer toCentury Communities, Inc. , aDelaware corporation, and, unless the context otherwise requires, its subsidiaries and affiliates. The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand our Company, business, operations and present business environment and is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Form 10-Q and our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 . We use certain non-GAAP financial measures that we believe are important for purposes of comparison to prior periods. This information is also used by our management to measure the profitability of our ongoing operations and analyze our business performance and trends. Some of the numbers included herein have been rounded for the convenience of presentation.
Insight
Century is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in 17 states. In many of our projects, in addition to building homes, we are responsible for the entitlement and development of the underlying land. We build and sell homes under ourCentury Communities and Century Complete brands. Our Century Communities brand offers a wide range of buyer profiles including: entry-level, first and second time move-up, and lifestyle homebuyers, and provides our homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. Our Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet and generally provides no option or upgrade opportunities. We now have six states where both Century brands have a presence and we believe there are more opportunities for increased penetration within our over 45 high-growth markets to enable both brands to benefit from increased scale and enhanced operational efficiencies. Our homebuilding operations are organized into the following five reportable segments: West, Mountain,Texas , Southeast, and Century Complete. Our indirect wholly-owned subsidiaries,Inspire Home Loans Inc. ,Parkway Title, LLC , andIHL Home Insurance Agency, LLC , which provide mortgage, title, and insurance services, respectively, primarily to our homebuyers have been identified as our Financial Services segment. While we offer homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, our offerings are heavily weighted towards providing affordable housing options in each of our homebuyer segments. Additionally, we prefer building move-in-ready homes over built-to-order homes, which we believe allows for a faster construction process, advantageous pricing with subcontractors, and shortened time period from home sale to home delivery, thus allowing us to more appropriately price the homes and deploy our capital. Of the 2,348 homes delivered during the first quarter of 2022, approximately 80% of our deliveries were made to entry-level homebuyers and approximately 97% of homes delivered were built as move-in ready homes. We anticipate the homebuilding markets in each of our operating segments will continue to be tied to both the local economy and the macro-economic environment. Despite overall strong demand and sales of our homes during the first quarter of 2022, continued future demand is uncertain as economic conditions are uncertain, in particular with respect to inflation; the impact of raising the federal funds interest rate by theFederal Reserve ; the extent to which and how long COVID-19 and related government directives, actions, and economic relief efforts will impact theU.S. economy, financial markets, credit and mortgage markets; consumer confidence; interest rates; availability and cost of mortgage loans to homebuyers; wage growth; household formations; levels of new and existing homes for sale; availability and cost of land, labor and construction materials; demographic trends; housing demand; and other factors, including those described elsewhere in this Form 10-Q. A decrease in demand for our homes would adversely affect our operating results in future periods, including our net sales, home deliveries, and average sales price, as well as have a direct effect on the origination volume of and revenues from our Financial Services segment. As a result, our past performance may not be indicative of future results. Additionally, our operating results could be impacted by a decrease in home affordability as a result of price appreciation, mortgage interest rate increases or tightening of mortgage lending standards. While interest rates on 30-year fixed mortgages have risen in recent months, they still remain near historic lows and we believe housing demographics and buyer demand will continue to remain strong at least in the short term and that we are well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase. Subject to deteriorating market conditions, we believe our operations are well-positioned for future growth as a result of the markets in which we operate, our product offerings which span the home buying segment, but focus on affordable price points, and our current and future inventories of attractive land positions. As we have grown, we have continued to focus on maintaining prudent leverage, and, as a result, we believe we are well positioned to execute on our growth strategy in order to optimize stockholder returns. 17
————————————————– ——————————
Contents
Operating results
During the three months endedMarch 31, 2022 , we generated total revenues of$1.0 billion , with home sales revenues of$988.4 million , an increase of 3.0% over the prior year period, and financial services revenue of$26.3 million , a decrease of 21.8% over the prior year period. The increase in home sales revenue was fueled by a 22.7% increase in the average sales price per home to$421,000 , partially offset by a 16.1% decrease in the number of homes delivered to 2,348 due to ongoing supply chain and labor challenges. This increase in home sales revenue combined with a 720 basis point increase in homebuilding gross margin percent resulted in a$188.8 million in income before income tax expense, net income of$142.5 million , or$4.20 per diluted share, compared to$101.7 million , or$3.00 per diluted share in the prior year period, and driving our return on equity to 33.7% on an annualized basis for the first quarter of 2022. During the first quarter of 2022, we paid cash dividends to our stockholders of$0.20 per share, an increase of 33.0% over previously paid quarterly dividends. We also returned capital to our stockholders via share repurchases of 1.0 million shares for$62.4 million or a weighted average price of$61.52 per share.
From
Driven by the continued strong demand for our homes through the first quarter of 2022, we ended the first quarter of 2022 with no amounts outstanding under our revolving line of credit,$209.0 million of cash and cash equivalents,$45.2 million of cash held in escrow, and a net homebuilding debt to net capital ratio of 29.3%. Additionally, we increased our land acquisition and development activities during the first quarter of 2022 to bolster our lot pipeline and support future community growth, which resulted in 85,577 lots owned and controlled atMarch 31, 2022 , a 48.7% increase as compared toMarch 31, 2021 and a 7.2% increase as compared toDecember 31, 2021 . Although the trajectory and strength of our markets have continued to remain strong and allowed us to pass on higher costs through selling price increases and thereby positively affecting our margins during the first quarter of 2022, we continued to experience labor, land and raw material shortages and delays, and material and labor supply cost pressures, and elongated construction cycle times to build homes in many of our markets, caused in part by increased demand, global supply chain disruptions, inflation, and municipal and utility delays, that could negatively impact our sales and margins in future periods. ? 18
————————————————– ——————————
Contents
The following table summarizes our results of operations for the three months endedMarch 31, 2022 and 2021. (in thousands, except per share amounts) Three Months Ended March 31, Increase (Decrease) 2022 2021 Amount % Consolidated Statements of Operations: Revenue Home sales revenues$ 988,415 $ 959,279 $ 29,136 3.0 % Land sales and other revenues 1,630 15,670 (14,040) (89.6) % Total homebuilding revenues 990,045 974,949 15,096 1.5 % Financial services revenues 26,305 33,620 (7,315) (21.8) % Total revenues 1,016,350 1,008,569 7,781 0.8 % Homebuilding cost of revenues Cost of home sales revenues (709,073) (756,507) 47,434 (6.3) % Cost of land sales and other revenues (846) (10,020)
9174 (91.6)%
(709,919) (766,527) 56,608 (7.4) % Financial services costs (15,154) (18,301) 3,147 (17.2) % Selling, general, and administrative (101,639) (92,151) (9,488) 10.3 % Other income (expense) (862) (541) (321) 59.3 % Income before income tax expense 188,776 131,049 57,727 44.0 % Income tax expense (46,280) (29,397) (16,883) 57.4 % Net income$ 142,496 $ 101,652 $ 40,844 40.2 % Earnings per share: Basic $ 4.25$ 3.03 $ 1.22 40.3 % Diluted $ 4.20$ 3.00 $ 1.20 40.0 % Adjusted diluted earnings per share(1) $ 4.20$ 3.00 $ 1.20 40.0 % Other Operating Information (dollars in thousands): Number of homes delivered 2,348 2,797 (449) (16.1) % Average sales price of homes delivered $ 421.0$ 343.0 $ 78 22.7 % Homebuilding gross margin percentage(2) 28.3 % 21.1 % 7.2 % 34.1 % Adjusted homebuilding gross margin excluding interest and inventory impairment and other (1) 29.5 % 23.1 % 6.4 % 27.7 % Backlog at end of period, number of homes 5,247 4,097 1,150 28.1 % Backlog at end of period, aggregate sales value$ 2,170,865 $ 1,579,599 $ 591,266 37.4 % Average sales price of homes in backlog $ 413.7$ 385.6 $ 28.1 7.3 % Net new home contracts 2,944 3,455 (511) (14.8) % Selling communities at period end 197 188 9 4.8 % Average selling communities 198 194 4 2.1 % Total owned and controlled lot inventory 85,577 57,536 28,041 48.7 % Adjusted EBITDA(1)$ 203,663 $ 152,121 $ 51,542 33.9 % Adjusted income before income tax expense(1)$ 188,776 $ 131,049 $ 57,727 44.0 % Adjusted net income(1)$ 142,496 $ 101,652 $ 40,844 40.2 % Net homebuilding debt to net capital (1) 29.3 % 19.9 % 9.4 % 47.2 % (1) This is a non-GAAP financial measure and should not be used as a substitute for the Company's operating results prepared in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under "Non-GAAP Financial Measures." An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. (2) Homebuilding gross margin percentage includes inventory impairment, which is included within inventory impairment and other on our condensed consolidated financial statements. No inventory impairments were recognized for the three months endedMarch 31, 2022 and 2021. ? 19
————————————————– ——————————
Contents
Results of Operations by Segment (dollars in thousands) Average Sales Price of Income before Income Tax New Homes Delivered Homes Delivered Home Sales Revenues Expense Three Months Ended Three Months Ended Three
Months Ended Three Months Ended March
March 31, March 31, March 31, 31, 2022 2021 2022 2021 2022 2021 2022 2021 West 396 319$ 663.5 $ 582.4 $ 262,732 $ 185,790 $ 71,242 $ 27,461 Mountain 514 685 546.0 423.5 280,655 290,065 56,999 51,980 Texas 366 328 339.5 267.5 124,256 87,739 20,570 8,531 Southeast 366 568 408.4 387.5 149,477 220,081 30,865 23,440 Century Complete 706 897 242.6 195.8 171,295 175,604 24,692 21,730 Financial Services - - - - - - 11,151 15,319 Corporate - - - - - - (26,743) (17,412) Total 2,348 2,797$ 421.0 $ 343.0 $ 988,415 $ 959,279 $ 188,776 $ 131,049 West During the three months endedMarch 31, 2022 , our West segment generated income before income tax expense of$71.2 million , a 159.4% increase over the prior year period. This increase was driven by an increase in home sales revenue of$76.9 million and an increase of 1,234 basis points in the percentage of income before income tax expense to home sales revenues, as a result of (1) increased revenue on a partially fixed cost base and (2) increased gross margins on home sales. The revenue increase during the three months endedMarch 31, 2022 was primarily generated by a 24.1% increase in the number of homes delivered, as well as a 13.9% increase in the average sales price per home. During the three months endedMarch 31, 2022 , the increase in the number of homes delivered was driven by favorable market dynamics across our markets, in the midst of ongoing supply chain and labor challenges. The average sales price increase was driven by the mix of deliveries within individual communities, as well as increased pricing power as a result of strong market dynamics. Mountain During the three months endedMarch 31, 2022 , our Mountain segment generated income before income tax expense of$57.0 million , a 9.7% increase over the prior year period. This increase was driven by an increase of 239 basis points in the percentage of income before income tax expense to home sales revenues as a result of increased gross margins on home sales, partially offset by a decrease in home sales revenue of$9.4 million . The revenue decrease during the three months endedMarch 31, 2022 was primarily generated by a 25.0% decrease in the number of homes delivered, partially offset by a 28.9% increase in the average sales price per home. During the three months endedMarch 31, 2022 , the decrease in the number of homes delivered was driven by ongoing supply chain and labor challenges, and the average sales price increase was driven by the mix of deliveries within individual communities, as well as increased pricing power as a result of strong market dynamics. Texas During the three months endedMarch 31, 2022 , ourTexas segment generated income before income tax expense of$20.6 million , a 141.1% increase over the prior year period. This increase was driven by an increase in home sales revenue of$36.5 million and an increase of 683 basis points in the percentage of income before income tax expense to home sales revenues, as a result of (1) increased revenue on a partially fixed cost base and (2) increased gross margins on home sales. The revenue increase during the three months endedMarch 31, 2022 was primarily generated by a 11.6% increase in the number of homes delivered, as well as a 26.9% increase in the average sales price per home. During the three months endedMarch 31, 2022 , the increase in the number of homes delivered was driven by favorable market dynamics across our markets, in the midst of ongoing supply chain and labor challenges. The average sales price increase was driven by the mix of deliveries within individual communities, as well as increased pricing power as a result of strong market dynamics Southeast During the three months endedMarch 31, 2022 , our Southeast segment generated income before income tax expense of$30.9 million , a 31.7% increase over the prior year period. This increase was driven by an increase of 1,000 basis points in the percentage of income before income tax expense to home sales revenues as a result of increased gross margins on home sales, partially offset by a decrease in home sales revenue of$70.6 million . The revenue decrease during the three months endedMarch 31, 2022 was primarily generated by a 35.6% decrease in the number of homes delivered, partially offset by a 5.4% increase in the average sales price per home. During the 20
————————————————– ——————————
Contents
three months endedMarch 31, 2022 , the decrease in the number of homes delivered was driven ongoing supply chain and labor challenges, and the average sales price increase was driven by the mix of deliveries within individual communities, as well as increased pricing power as a result of strong market dynamics. Century Complete During the three months endedMarch 31, 2022 , our Century Complete segment generated income before income tax expense of$24.7 million , a 13.6% increase over the prior year period. This increase was driven by an increase of 204 basis points in the percentage of income before income tax expense to home sales revenues as a result of increased gross margins on home sales, partially offset by a decrease in home sales revenue of$4.3 million . The revenue decrease during the three months endedMarch 31, 2022 was primarily generated by a 21.3% decrease in the number of homes delivered, partially offset by a 23.9% increase in the average sales price per home. During the three months endedMarch 31, 2022 , the decrease in the number of homes delivered was driven ongoing supply chain and labor challenges, and the average sales price increase was driven by the mix of deliveries within individual communities, as well as increased pricing power as a result of strong market dynamics. Financial Services Our Financial Services segment originates mortgages for primarily our homebuyers, and as such, performance typically correlates to the number of homes delivered. Our Financial Services segment generated income before income tax of$11.2 million for the three months endedMarch 31, 2022 , a 27.2% decrease over the prior year period. This decrease was primarily the result of a$7.3 million decrease in financial services revenue during the three months endedMarch 31, 2022 compared to the prior year period, due to (1) a 33.9% decrease to 1,520 in the number of mortgages originated during the three months endedMarch 31, 2022 , due to the decrease in the number of homes delivered by ourCentury Communities and Century Complete brands over the prior year period, and (2) reduced gain on sale margins on loans sold to third parties period over period due to market conditions driving increased interest rates. The following table presents selected operational data for our Financial Services segment in relation to our loan origination activities (dollars in thousands): Three Months Ended March 31, 2022 2021 Total originations: Number of loans 1,520 2,301 Principal$ 552,056 $ 709,291 Capture rate of Century homebuyers 77 % 76 % Century Communities 81 % 84 % Century Complete 64 % 58 % Average FICO score 732 737 Century Communities 739 744 Century Complete 708 710 Loans sold to third parties: Number of loans sold 1,959 2,279 Principal$ 692,064 $ 681,157 Corporate During the three months endedMarch 31, 2022 , our Corporate segment generated a loss of$26.7 million as compared to a loss of$17.4 million for the same period in 2021. This increase in loss is primarily attributed to higher compensation costs, including estimated bonuses.
Residential Construction Gross Margin
(dollars in thousands) Homebuilding gross margin represents home sales revenues less cost of home sales revenues and inventory impairment and other. Our homebuilding gross margin percentage, which represents homebuilding gross margin divided by home sales revenues, increased during the three months endedMarch 31, 2022 to 28.3% as compared to 21.1% for the same period in 2021. This increase was driven by (1) the positive homebuilding sales environment across our markets, which resulted in increased demand, (2) our ability to increase sales 21
————————————————– ——————————
Contents
price in excess of an increase in our labor and direct costs period over period, (3) benefits from our increased scale driving building efficiencies and streamlined production processes, and (4) the realization of less interest in cost of home sales revenue over the prior period. In the following table, we calculate our homebuilding gross margin, as adjusted to exclude inventory impairment and other and interest in cost of home sales revenues. Three Months Ended March 31, 2022 % 2021 % Home sales revenues$ 988,415 100.0 %$ 959,279 100.0 % Cost of home sales revenues (709,073) (71.7) % (756,507) (78.9) % Inventory impairment and other - - % - - % Gross margin from home sales 279,342 28.3 % 202,772 21.1 % Add: Inventory impairment and other - - % - - % Add: Interest in cost of home sales revenues 12,146 1.2 % 18,377 1.9 % Adjusted homebuilding gross margin excluding interest and inventory impairment and other (1)$ 291,488 29.5 % $
221,149 23.1%
(1)This non-GAAP financial measure should not be used as a substitute for the Company's operating results in accordance with GAAP. See the reconciliations to the most comparable GAAP measure and other information under "-Non-GAAP Financial Measures." An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. For the three months endedMarch 31, 2022 , excluding inventory impairment and other, and interest in cost of home sales revenues, our adjusted homebuilding gross margin percentage was 29.5% as compared to 23.1% for the same period in 2021. We believe the above information is meaningful as it isolates the impact that inventory impairment, indebtedness and acquisitions (if applicable) have on our homebuilding gross margin and allows for comparability of our homebuilding gross margins to previous periods and our competitors. ? 22
————————————————– ——————————
Contents
Selling, General and Administrative Expense (dollars in thousands) Three Months Ended March 31, Increase 2022 2021 Amount % Selling, general and administrative$ 101,639 $ 92,151 $ 9,488 10.3 % As a percentage of home sales revenue 10.3 % 9.6 % Our selling, general and administrative expense increased$9.5 million for the three months endedMarch 31, 2022 as compared to the prior year period. This increase was primarily attributable to an increase of$9.0 million in salaries and wages expense as compared to the same period in 2021 due to increased headcount, increased base pay due to market conditions, and increased incentive based compensation accruals, as well as increases in expenses in numerous areas to support our growth. The increase for the three months endedMarch 31, 2022 was partially offset by a decrease in internal and external commission expense of$5.7 million . During the three months endedMarch 31, 2022 , our selling, general, and administrative expense increased 70 basis points as a percentage of home sales revenue as compared to the prior year period, that was partially mitigated as a result of increased revenues on a partially fixed cost base.
income tax expense
At the end of each interim period we are required to estimate our annual effective tax rate for the fiscal year, and to use that rate to provide for income taxes for the current year-to-date reporting period. Our 2022 estimated annual effective tax rate, before discrete items, of 25.5% is driven by our blended federal and state statutory rate of 24.7%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation which increased our rate by 0.8%. For the three months endedMarch 31, 2022 , our estimated annual rate of 25.5% was impacted by discrete items which had a net impact of decreasing our rate by 1.0%, including excess tax benefits for vested stock-based compensation and federal energy tax credits claimed on prior year home deliveries in excess of previous estimates. Our estimated annual rate for the three months endedMarch 31, 2022 of 25.5% increased by 330 basis points as compared to our effective tax rate for the year endedDecember 31, 2021 of 22.2%. The increase in our estimated rate is driven by the expiration of the Energy Efficient Home Credit onDecember 31, 2021 .
the
The Energy Efficient Home Credit provided a
For the three months ended
March 31, December 31 Increase (Decrease) 2022 2021 Amount Change West$ 724,968 $ 668,830 $ 56,138 8.4 % Mountain 1,016,202 1,008,481 7,721 0.8 % Texas 365,114 322,302 42,812 13.3 % Southeast 401,522 360,644 40,878 11.3 % Century Complete 424,854 371,096 53,758 14.5 % Financial Services 396,178 533,159 (136,981) (25.7) % Corporate 166,663 232,364 (65,701) (28.3) % Total assets$ 3,495,501 $ 3,496,876 $ (1,375) 0.0 % 23
————————————————– ——————————
Contents
Total assets remained relatively consistent at$3.5 billion as ofMarch 31, 2022 as compared toDecember 31, 2021 , primarily as a result of a decrease in mortgage loans held for sale period over period, partially offset by overall growth of the Company and the increase in the number of lots owned period over period. Lots owned and controlled March 31, 2022 December 31, 2021 % Change Owned Controlled Total Owned Controlled Total Owned Controlled Total West 4,835 3,789 8,624 4,440 4,877 9,317 8.9 % (22.3) % (7.4) % Mountain 11,752 7,980 19,732 11,860 8,039 19,899 (0.9) % (0.7) % (0.8) % Texas 6,518 9,099 15,617 5,340 8,159 13,499 22.1 % 11.5 % 15.7 % Southeast 6,185 16,677 22,862 5,928 14,195 20,123 4.3 % 17.5 % 13.6 % Century Complete 5,521 13,221 18,742 5,287 11,734 17,021 4.4 % 12.7 % 10.1 % Total 34,811 50,766 85,577 32,855 47,004 79,859 6.0 % 8.0 % 7.2 % Of our total lots owned and controlled as ofMarch 31, 2022 , 40.7% were owned and 59.3% were controlled, as compared to 41.1% owned and 58.9% controlled as ofDecember 31, 2021 .
Other residential construction operating data
Three Months Ended Net new home contracts March 31, Increase (Decrease) 2022 2021 Amount % Change West 417 394 23 5.8 % Mountain 586 947 (361) (38.1) % Texas 412 518 (106) (20.5) % Southeast 409 476 (67) (14.1) % Century Complete 1,120 1,120 - - % Total 2,944 3,455 (511) (14.8) % Net new home contracts (new home contracts net of cancellations) for the three months endedMarch 31, 2022 decreased by 511 homes, or 14.8%, to 2,944, as compared to 3,455 for the three months endedMarch 31, 2021 . The decrease was primarily driven by having fewer homes available to sell compared to the prior year period. Monthly Absorption Rate
Our overall monthly “burn rate” (the rate at which stay-at-home orders are contracted, net of cancellations) for the three months ended
Three Months Ended March 31, Increase (Decrease) 2022 2021 Amount % Change West 6.3 6.9 (0.6) (8.7) % Mountain 5.6 8.1 (2.5) (30.9) % Texas 7.6 13.3 (5.7) (42.9) % Southeast 6.2 7.9 (1.7) (21.5) % Century Complete 3.7 3.8 (0.1) (2.6) % Total 5.0 6.1 (1.1) (18.0) % 24
————————————————– ——————————
Contents
During the three months endedMarch 31, 2022 , our absorption rates decreased by 18.0% to 5.0 per month as compared to the same period in 2021. The decrease was primarily driven by the decrease in net new home contracts primarily as a result of having fewer homes available to sell compared to the prior year period. Absorption rates, however, continued to be strong across all of our markets driven by favorable market dynamics across our markets. Selling communities at period end As of March 31, Increase/(Decrease) 2022 2021 Amount % Change West 22 19 3 15.8 % Mountain 35 39 (4) (10.3) % Texas 18 13 5 38.5 % Southeast 22 20 2 10.0 % Century Complete 100 97 3 3.1 % Total 197 188 9 4.8 %
Our sales communities have grown to 197 communities at
Backlog (dollars in thousands) As of March 31, 2022 2021 % Change Average Average Sales Sales Average Homes Dollar Value Price Homes Dollar Value Price Homes Dollar Value Sales Price West 545$ 412,519 $ 756.9 561$ 342,688 $ 610.9 (2.9) % 20.4 % 23.9 % Mountain 1,117 641,820 574.6 1,051 520,004 494.8 6.3 % 23.4 % 16.1 % Texas 432 156,391 362.0 575 187,594 326.3 (24.9) % (16.6) % 10.9 % Southeast 756 356,413 471.4 709 279,904 394.8 6.6 % 27.3 % 19.4 % Century Complete 2,397 603,722 251.9 1,201 249,409 207.7 99.6 % 142.1 % 21.3 % Total / Weighted Average 5,247$ 2,170,865 $ 413.7 4,097$ 1,579,599 $ 385.6 28.1 % 37.4 % 7.3 % ? Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contract with a customer but for which we have not yet delivered the home. AtMarch 31, 2022 , we had 5,247 homes in backlog with a total value of$2.2 billion , which represents increases of 28.1% and 37.4%, respectively, as compared to 4,097 homes in backlog with a total value of$1.6 billion atMarch 31, 2021 . The increase in backlog dollar value is primarily attributable to the increase in backlog units and a 7.3% increase in the average sales price of homes in backlog, partially offset by a decreases in backlog units for ourTexas and West segments. Supplemental Guarantor Information Our 6.750% senior notes due 2027 (which we collectively refer to as our "2027 Notes") and our 3.875% senior notes due 2029 (which we collectively refer to as our "2029 Notes" and together with the 2027 Notes, the "Senior Notes") are our unsecured senior obligations and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by substantially all of our direct and indirect wholly-owned operating subsidiaries (which we refer to collectively as "Guarantors"). In addition, our former 5.875% senior notes due 2025 (which we collectively refer to as our "2025 Notes"), which were extinguished during the year endedDecember 31, 2021 , were our unsecured senior obligations and were fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the Guarantors. Our subsidiaries associated with our Financial Services operations (referred to as "Non-Guarantors") do not guarantee the Senior Notes. The guarantees are senior unsecured obligations of the Guarantors that rank equal with all existing and future senior debt of the Guarantors and senior to all subordinated debt of the Guarantors. The guarantees are effectively subordinated to any secured debt of the Guarantors. As ofMarch 31, 2022 ,Century Communities, Inc. had outstanding$1.0 billion in total principal amount of Senior Notes. Each of the indentures governing our Senior Notes provides that the guarantees of a Guarantor will be automatically and unconditionally released and discharged: (1) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the equity interests of such Guarantor after which the applicable Guarantor is no longer a "Restricted Subsidiary" (as defined in the respective indentures), which sale, transfer, exchange or other disposition does not constitute an "Asset Sale" (as defined in the respective 25
————————————————– ——————————
Contents
indentures) or is made in compliance with applicable provisions of the applicable indenture; (2) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the assets of such Guarantor, which sale, transfer, exchange or other disposition does not constitute an Asset Sale or is made in compliance with applicable provisions of the applicable indenture; provided, that after such sale, transfer, exchange or other disposition, such Guarantor is an "Immaterial Subsidiary" (as defined in the respective indentures); (3) unless a default has occurred and is continuing, upon the release or discharge of such Guarantor from its guarantee of any indebtedness for borrowed money of the Company and the Guarantors so long as such Guarantor would not then otherwise be required to provide a guarantee pursuant to the applicable indenture; provided that if such Guarantor has incurred any indebtedness in reliance on its status as a Guarantor in compliance with applicable provisions of the applicable Indenture, such Guarantor's obligations under such indebtedness, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Guarantor) in compliance with applicable provisions of the applicable Indenture; (4) upon the designation of such Guarantor as an "Unrestricted Subsidiary" (as defined in the respective Indentures), in accordance with the applicable indenture; (5) if the Company exercises its legal defeasance option or covenant defeasance option under the applicable indenture or if the obligations of the Company and the Guarantors are discharged in compliance with applicable provisions of the applicable indenture, upon such exercise or discharge; or (6) in connection with the dissolution of such Guarantor under applicable law in accordance with the applicable indenture. The indenture governing our former 2025 Notes contained a similar provision. If a guarantor were to become a debtor in a case under the US Bankruptcy Code, a court may decline to enforce its guarantee of the Senior Notes. This may occur when, among other factors, it is found that the guarantor originally received less than fair consideration for the guarantee and the guarantor would be rendered insolvent by enforcement of the guarantee. On the basis of historical financial information, operating history and other factors, we believe that each of the guarantors, after giving effect to the issuance of its guarantee of the Senior Notes when the guarantee was issued, was not insolvent and did not and has not incurred debts beyond its ability to pay such debts as they mature. The Company cannot predict, however, what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. Only the 2027 Notes and the related guarantees are, and the former 2025 Notes and the related guarantees were, registered securities under the Securities Act of 1933, as amended (the "Securities Act"). The offer and sale of the 2029 Notes and the related guarantees were not and will not be registered under the Securities Act or the securities laws of any other jurisdiction and instead were issued in reliance upon an exemption from such registration. Unless they are subsequently registered under the Securities Act, neither the 2029 Notes nor the related guarantees may be offered and sold only in transactions that are exempt from the registration requirements under the Securities Act and the applicable securities laws of any other jurisdiction. As the guarantees for the 2027 Notes and the guarantees for the former 2025 Notes were made in connection with the issuance of the 2027 Notes and former 2025 Notes and exchange offers effected under the Securities Act inFebruary 2015 ,October 2015 andApril 2017 , the Guarantors' condensed supplemental financial information is presented in this report as if the guarantees existed during the periods presented pursuant to applicableSEC rules and guidance. If any Guarantors are released from the guarantees in future periods, the changes are reflected prospectively. We have determined that separate, full financial statements of the Guarantors would not be material to investors, and accordingly, supplemental financial information is presented below. 26
————————————————– ——————————
Contents
The following summarized financial information is presented forCentury Communities, Inc. and the Guarantor Subsidiaries on a combined basis after eliminating intercompany transactions and balances amongCentury Communities, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from Non-Guarantor Subsidiaries. Century Communities, Inc. and Guarantor Subsidiaries Summarized Balance Sheet Data (in thousands) March 31, 2022 December 31, 2021 Assets Cash and cash equivalents $ 67,618 $ 180,843 Cash held in escrow 45,212 52,297 Accounts receivable 43,189 39,492 Inventories 2,680,195 2,456,614 Prepaid expenses and other assets 186,556 160,999 Property and equipment, net 27,171 24,220 Deferred tax assets, net 21,272 21,239 Goodwill 30,395 30,395 Total assets $ 3,101,608 $ 2,966,099 Liabilities and stockholders' equity Liabilities: Accounts payable $ 89,815 $
82,734
Accrued expenses and other liabilities 349,702 288,229 Notes payable 1,010,961 998,936 Revolving line of credit - - Total liabilities 1,450,478 1,369,899 Stockholders' equity: 1,651,130 1,596,200
Total liabilities and equity $3,101,608
2,966,099
Summarized Statements of Operations Data (in thousands) Three Months Ended Year Ended March 31, 2022 December 31, 2021 Total homebuilding revenues $ 990,045 $ 4,092,576 Total homebuilding cost of revenues (709,919)
(3,095,363)
Selling, general and administrative (101,639)
(389,610)
Loss on debt extinguishment -
(14,458)
Inventory impairment and other -
(41)
Other income (expense) (1,099)
(3,307)
Income before income tax expense 177,388 589,797 Income tax expense (43,488) (131,201) Net income $ 133,900 $ 458,596 ? 27
————————————————– ——————————
Contents
Critical accounting policies
Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and the estimates included in our financial statements might be impacted if we used different assumptions or conditions. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , filed with theSEC onFebruary 3, 2022 , in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies." Liquidity and Capital Resources Overview Our liquidity, consisting of our cash and cash equivalents and cash held in escrow and Credit Facility availability, was$1.1 billion as ofMarch 31, 2022 , compared to$1.2 billion as ofDecember 31, 2021 . Our principal uses of capital for the three months endedMarch 31, 2022 were our land purchases, land development, home construction, share repurchases, and the payment of routine liabilities. We increased our land acquisition and development activities during 2022, which resulted in 34,811 lots owned atMarch 31, 2022 , a 6.0% increase as compared toDecember 31, 2021 . Cash flows for each of our communities depend on the stage in the development cycle and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our inventory and not recognized in our consolidated statements of operations until a home closes, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint, we are actively acquiring and developing lots in our markets to maintain and grow our lot supply and active selling communities. As we continue to expand our business, our cash outlays for land purchases and land development to grow our lot inventory may exceed our cash generated by operations. Under our shelf registration statement, which we filed with theSEC onJuly 1, 2021 and was automatically effective upon filing, we have the ability to access the debt and equity capital markets in registered transactions from time to time and as needed as part of our ongoing financing strategy and subject to market conditions. InAugust 2021 , we filed a prospectus supplement to offer up to$100.0 million under the shelf registration statement under our at-the-market facility described below.
Short-term liquidity and capital resources
We use funds generated by operations, available borrowings under our Credit Facility, and proceeds from issuances of debt or equity, including our current at-the-market facility, to fund our short term working capital obligations and fund our purchases of land, as well as land development, home construction activities, and other cash needs. Our Financial Services operations use funds generated from operations, and availability under our mortgage repurchase facilities to finance its operations including originations of mortgage loans to our homebuyers. We believe that we will be able to fund our current liquidity needs for at least the next twelve months with our cash on hand, cash generated from operations, and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available or on acceptable terms, especially in light of the current COVID-19 pandemic, its impact on the macro-economy, and market conditions at the time. While the impact of the COVID-19 pandemic will continue to evolve, we believe we are well positioned from a cash and liquidity standpoint to not only operate in an uncertain environment, but also continue to grow with the market and pursue other ways to properly deploy capital to enhance returns, which may include taking advantage of strategic opportunities as they arise. Long-term Liquidity and Capital Resources Beyond the next twelve months, we believe that our principal uses of capital will be land and inventory purchases and other expenditures to invest in our future growth, as well as principal and interest payments on our long-term debt obligations. We believe that we will be able to fund our long-term liquidity needs with cash generated from operations and cash expected to be available from our revolving line of credit or through accessing debt or equity capital, as needed or appropriate, although no assurance can be provided that such additional debt or equity capital will be available. To the extent these sources of capital are insufficient to meet our needs, we may also 28
————————————————– ——————————
Contents
make additional public or private offerings of our securities, refinance debt or divest certain assets to fund our operations and capital requirements.
Material Cash Requirements In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. These obligations impact our short-term and long-term liquidity and capital resource needs. For the three months endedMarch 31, 2022 , there were no material changes to the contractual obligations we previously disclosed in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 that was filed with theSEC onFebruary 3, 2022 . In the ordinary course of business, we enter into land purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. Purchase and option contracts for the purchase of land enable us to defer acquiring portions of properties owned by third parties until we have determined whether to exercise our option, which may serve to reduce our financial risks associated with long-term land holdings. These purchase contracts typically require a cash deposit, and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and others as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. Option contracts generally require payment by us of a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. Our obligations with respect to purchase contracts and option contracts are generally limited to the forfeiture of the related non-refundable cash deposits. As ofMarch 31, 2022 , we had outstanding purchase contracts and option contracts for 50,766 lots totaling approximately$2.2 billion and we had$67.1 million of deposits for land contracts, of which$38.4 million were non-refundable cash deposits pertaining to land contracts. While our performance, including the timing and amount of purchase, if any, under these outstanding purchase and option contracts is subject to change, we currently anticipate performing on the majority of the purchase and option contracts during the next twelve to eighteen months, with performance on the remaining purchase and option contacts occurring in future periods. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions. Outstanding Debt Obligations and Debt Service Requirements Our outstanding debt obligations included the following as ofMarch 31, 2022 andDecember 31, 2021 (in thousands):March 31 ,December 31, 2022 2021
3.875% Senior Notes, due
6.750% Senior Notes, due
20,866 9,238 Notes payable 1,010,961 998,936 Revolving line of credit - - Mortgage repurchase facilities 193,028 331,876 Total debt$ 1,203,989 $ 1,330,812 (1)The carrying value of the senior notes reflects the impact of premiums, discounts, and issuance costs that are amortized to interest cost over the respective terms of the senior notes. A summary of our debt obligations is included in Note 9 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , filed with theSEC onFebruary 3, 2022 and in Note 8 to our condensed consolidated financial statements in this Form 10-Q. We may from time to time seek to refinance or increase our outstanding debt or retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may or may not be material during any particular reporting period. 29
————————————————– ——————————
Contents
Letters of Credit and Performance Bonds In the normal course of business, we post letters of credit and performance and other bonds primarily related to our land development performance obligations with local municipalities. As ofMarch 31, 2022 andDecember 31, 2021 , we had$528.9 million and$492.5 million , respectively, in letters of credit and performance and other bonds issued and outstanding. Although significant development and construction activities have been completed related to the improvements at these sites, the letters of credit and performance and other bonds are not generally released until all development and construction activities are completed. Revolving Line of Credit OnJune 5, 2018 , we entered into an Amended and Restated Credit Agreement withTexas Capital Bank, National Association , as Administrative Agent and L/C Issuer, the lenders party thereto and certain of our subsidiaries (which we refer to as the "Amended and Restated Credit Agreement"), which provided us with a revolving line of credit of up to$640.0 million , and unless terminated earlier, was scheduled to mature onApril 30, 2023 . OnMay 21, 2021 , we entered into a Second Amended and Restated Credit Agreement (the "Second A&R Credit Agreement") with,Texas Capital Bank, National Association , as Administrative Agent and L/C Issuer, and the lenders party thereto. The Second A&R Credit Agreement, which amended and restated the Amended and Restated Credit Agreement, provides us with a senior unsecured revolving line of credit (the "Credit Facility") of up to$800 million , and unless terminated earlier, will mature onApril 30, 2026 . The Credit Facility includes a$250.0 million sublimit for standby letters of credit. Under the terms of the Second A&R Credit Agreement, the Company is entitled to request an increase in the size of the Credit Facility by an amount not exceeding$200 million . Our obligations under the Second A&R Credit Agreement are guaranteed by certain of our subsidiaries. The Second A&R Credit Agreement contains customary affirmative and negative covenants (including limitations on our ability to grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions), as well as customary events of default. Borrowings under the Second A&R Credit Agreement bear interest at a floating rate equal to the adjusted Eurodollar Rate plus an applicable margin between 2.05% and 2.65% per annum, and if made available in the Administrative Agent's discretion, a base rate plus an applicable margin between 1.05% and 1.65% per annum. As ofMarch 31, 2022 , we had no amounts outstanding under the Credit Facility and were in compliance with all covenants under the Second A&R Credit Agreement. Mortgage Repurchase Facilities - Financial Services OnMay 4, 2018 ,September 14, 2018 , andAugust 1, 2019 , Inspire entered into mortgage warehouse facilities, withComerica Bank , J.P. Morgan, and Wells Fargo, respectively. The mortgage warehouse lines of credit (which we refer to as the "Repurchase Facilities"), which were increased during 2020, provide Inspire with uncommitted repurchase facilities of up to an aggregate of$325 million as ofMarch 31, 2022 , secured by the mortgage loans financed thereunder. The Repurchase Facilities have varying short term maturity dates throughAugust 23, 2022 and bear a weighted average interest rate of 2.172%. Amounts outstanding under the Repurchase Facilities are not guaranteed by us or any of our subsidiaries and the agreements contain various affirmative and negative covenants applicable to Inspire that are customary for arrangements of this type. As ofMarch 31, 2022 , we had$193.0 million outstanding under these Repurchase Facilities and were in compliance with all covenants thereunder. During the three months endedMarch 31, 2022 and 2021, we incurred interest expense on the Repurchase Facilities of$0.4 million and$0.8 million , respectively. Interest expense on the Repurchase Facilities is included in financial services costs on our condensed consolidated statements of operations. At-the-Market Offerings OnNovember 27, 2019 , we entered into a Distribution Agreement withJ.P. Morgan Securities LLC ,BofA Securities, Inc. ,Citigroup Global Markets Inc. , andFifth Third Securities, Inc. (which we refer to as the "Distribution Agreement"), as sales agents pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to$100.0 million from time to time through any of the sales agents party thereto in "at-the-market" offerings, in accordance with the terms and conditions set forth in the Distribution Agreement. This Distribution Agreement, which superseded and replaced a prior similar distribution agreement, and was amended inJuly 2021 to acknowledge our filing of a new registration statement on Form S-3 registering the issuance and sale of shares of our common stock under the Distribution Agreement and replaceCitigroup Global Markets Inc. withWells Fargo Securities, LLC as a sales agent, had all$100 million available for sale as ofMarch 31, 2022 . We did not sell or issue any shares of our common stock during the three months endedMarch 31, 2022 and 2021, respectively. The Distribution Agreement will remain in full force and effect until terminated by either party pursuant to the terms of the agreement or such date that the maximum offering amount has been sold in accordance with the terms of the agreement. 30
————————————————– ——————————
Contents
Stock Repurchase Program OnNovember 6, 2018 , our Board of Directors authorized a stock repurchase program, under which we may repurchase up to 4,500,000 shares of our outstanding common stock. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws. The actual manner, timing, amount and value of repurchases under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of our common stock, trading volume, other capital management objectives and opportunities, applicable legal requirements, and general market and economic conditions. We intend to finance any stock repurchases through available cash and our Credit Facility. Repurchases also may be made under a trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when we otherwise may be precluded from doing so because of self-imposed trading blackout periods or other regulatory restrictions. The stock repurchase program has no expiration date and may be extended, suspended or discontinued by our Board of Directors at any time without notice at our discretion. All shares of common stock repurchased under the program will be cancelled and returned to the status of authorized but unissued shares of common stock. During the three months endedMarch 31, 2022 , an aggregate of 1.0 million shares of our common stock were repurchased for a total purchase price of approximately$62.4 million and a weighted average price of$61.52 per share. During the three months endedMarch 31, 2021 , we did not repurchase any shares of our common stock. The maximum number of shares available to be purchased under the stock repurchase program as ofMarch 31, 2022 was 2,799,552 shares. Dividends OnMay 19, 2021 , our Board of Directors announced the approval of the initiation of a quarterly cash dividend. The following table sets forth cash dividends declared by our Board of Directors to holders of record of our common stock during the three months endedMarch 31, 2022 , an increase of 33.0% over previously paid quarterly dividends (in thousands, except per share information): Cash Dividends Declared Declaration Date Record Date Payable Date Per Share Amount February 16, 2022 March 2, 2022 March 16, 2022$ 0.20 $ 6,657 The declaration and payment of future cash dividends on our common stock, whether at current levels or at all, are at the discretion of our Board of Directors and depend upon, among other things, our expected future earnings, cash flows, capital requirements, access to external financing, debt structure and any adjustments thereto, operational and financial investment strategy and general financial condition, as well as general business conditions. 31
————————————————– ——————————
Contents
Cash Flows- Three Months EndedMarch 31, 2022 Compared to the Three Months EndedMarch 31, 2021 For the three months endedMarch 31, 2022 and 2021, the comparison of cash flows is as follows: ?Our primary sources of cash flows from operations are from the sale of single-family attached and detached homes and mortgages. Our primary uses of cash flows from operations are the acquisition of land and expenditures associated with the construction of our single-family attached and detached homes and the origination of mortgages held for sale. Net cash provided by operating activities was$109.4 million during the three months endedMarch 31, 2022 as compared to net cash provided by operating activities of$96.1 million during 2021. The increase in cash provided by operations is primarily a result of increased investment in our homebuilding inventories for the three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 , partially offset by a decrease in mortgage loans held for sale and a$40.8 million increase in net income during three months endedMarch 31, 2022 as compared to the three months endedMarch 31, 2021 . ?Net cash used in investing activities increased to$5.1 million during the three months endedMarch 31, 2022 , compared to$2.9 million used during the same period in 2021. The increase was primarily related to more purchases of property and equipment during the current year period. ?Net cash used in financing activities increased to$208.4 million during the three months endedMarch 31, 2022 , compared to net cash provided by financing activities of$16.3 million during the same period in 2021. The increase in cash used in financing activities was primarily attributable to (1) a$164.8 million increase in net payments on the Repurchase Facilities (2) a$62.4 million increase in repurchases of our common stock and (3)$6.7 million in dividend payments during the three months endedMarch 31, 2022 compared to no dividend payments during the prior year period. As ofMarch 31, 2022 , our cash and cash equivalents and restricted cash balance was$218.2 million . ? 32
————————————————– ——————————
Contents
Non-GAAP Financial Measures
In this Form 10-Q, we use certain non-GAAP financial measures, including EBITDA, Adjusted EBITDA, net homebuilding debt to net capital, and adjusted net earnings per diluted common shares. These non-GAAP financial measures are presented to provide investors additional information to facilitate the comparison of our past and present operations. We believe these non-GAAP financial measures provide useful information to investors because they are used to evaluate our performance on a comparable year-over-year basis. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive or standard set of accounting rules or principles. Accordingly, the calculation of our non-GAAP financial measures may differ from the definitions of other companies using the same or similar names limiting, to some extent, the usefulness of such measures for comparison purposes. Non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP. These measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures. Accordingly, we qualify our use of non-GAAP financial information in a statement when non-GAAP financial information is presented. EBITDA and Adjusted EBITDA The following table presents EBITDA and Adjusted EBITDA for the three months endedMarch 31, 2022 and 2021. 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, (v) loss on debt extinguishment, and (vi) inventory impairment and other. 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. (dollars in thousands) Three Months Ended March 31, 2022 2021 % Change Net income$ 142,496 $ 101,652 40.2 % Income tax expense 46,280 29,397 57.4 % Interest in cost of home sales revenues 12,146 18,377 (33.9) % Interest expense (income) 135 (111) (221.6) % Depreciation and amortization expense 2,606 2,806 (7.1) % EBITDA 203,663 152,121 33.9 % Inventory impairment and other - - NM Adjusted EBITDA$ 203,663 $ 152,121 33.9 % NM - Not Meaningful ? 33
————————————————– ——————————
Contents
Net residential construction debt at
The following table presents our ratio of net homebuilding debt to net capital, which is a non-GAAP financial measure. We calculate this by dividing net homebuilding debt (notes payable and borrowings under our revolving line of credit less cash and cash equivalents, and cash held in escrow) by net capital (net homebuilding debt plus total stockholders' equity). Homebuilding debt is our total debt minus outstanding borrowings under our mortgage repurchase facilities. The most directly comparable GAAP measure is the ratio of debt to total capital. We believe the ratio of net homebuilding debt to net capital is a relevant and useful financial measure to investors in understanding the leverage employed in our operations and as an indicator of our ability to obtain external financing. (dollars in thousands) March 31, December 31, 2022 2021 Notes payable$ 1,010,961 $ 998,936 Revolving line of credit - - Total homebuilding debt 1,010,961 998,936
Total equity 1,829,862 1,764,508 Total capital
$ 2,840,823 $ 2,763,444 Homebuilding debt to capital 35.6% 36.1% Total homebuilding debt$ 1,010,961 $ 998,936 Cash and cash equivalents (209,046) (316,310) Cash held in escrow (45,212) (52,297) Net homebuilding debt 756,703 630,329 Total stockholders' equity 1,829,862 1,764,508 Net capital$ 2,586,565 $ 2,394,837 Net homebuilding debt to net capital 29.3% 26.3% ? 34
————————————————– ——————————
Contents
Adjusted net earnings and adjusted diluted earnings per share
Adjusted Net Income and Adjusted Diluted Earnings per Share (which we refer to as "Adjusted EPS") are non-GAAP financial measures that we believe are useful to management, investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of certain non-recurring items. We believe excluding certain non-recurring items provides more comparable assessment of our financial results from period to period. We define Adjusted Net Income as consolidated net income before (i) income tax expense, (ii) inventory impairment and other (iii) restructuring costs, and (iv) loss on debt extinguishment, less adjusted income tax expense, calculated using the Company's estimated annual effective tax rate after discrete items for the applicable period. Adjusted Diluted EPS is calculated by excluding the effect of loss on inventory impairment and other, restructuring costs and loss on debt extinguishment from the calculation of reported EPS.
(in thousands, except per share amounts)
Three Months Ended March 31, 2022 2021 Numerator Net income$ 142,496 $ 101,652 Denominator Weighted average common shares outstanding - basic 33,530,610
33,563,903
Dilutive effect of restricted stock units 411,624
320 372
Weighted average number of ordinary shares outstanding – diluted 33,942,234
33,884,275 Earnings per share: Basic $ 4.25$ 3.03 Diluted $ 4.20$ 3.00 Adjusted earnings per share Numerator Net income$ 142,496 $ 101,652 Income tax expense 46,280 29,397 Income before income tax expense 188,776
131,049
Inventory impairment and other - - Adjusted income before income tax expense 188,776
131,049
Adjusted income tax expense(1) (46,280) (29,397) Adjusted net income$ 142,496 101,652 Denominator - Diluted 33,942,234 33,884,275 Adjusted diluted earnings per share $ 4.20
(1)The tax rate used in calculating adjusted net income for the three months endedMarch 31, 2022 andMarch 31, 2021 was 24.5% and 22.4%, respectively, which is reflective of the Company's estimated annual effective tax rate after discrete items for the applicable period. ? 35
————————————————– ——————————
Contents
© Edgar Online, source
Comments are closed.