In its second quarter earnings report, released yesterday, Century Communities posted a 34% increase in earnings. Its $0.62 per share number beat analysts' $0.54 projection.
Century's home sales revenues grew 38% to $257.2 million, its home deliveries rose 21% to 768 Homes, its net new home contracts increased 21% to 869 contracts, backlog dollar value increased 17% to $406.7 million, and its home building gross margin percentage in the second quarter 2016 was 19.2%, as compared to 19.6% in the prior year quarter.
“We delivered second quarter results in accordance with our plan with double-digit gains in home deliveries, revenues, new contracts and backlog value. We’re pleased with this progress and the balanced contribution to our success from all of our major markets during the quarter,” stated Dale Francescon, Co-CEO of Century in the earnings release. “We increased adjusted gross margin by 36%, which more than offset additional SG&A investment to support our growth initiatives. We enter the second half of 2016 with an optimistic growth outlook and we remain confident in our ability to accomplish our full year goals.”
“During the second quarter, we experienced an overall higher level of activity with ten new community openings helping us capture additional traffic in our neighborhoods,” said Rob Francescon, Co-Ceo. “The number of new contracts rose in every region, with Nevada nearly doubling. Even with the 21% increase in deliveries and strong revenue growth, our backlog continued to expand. Most of our markets are experiencing favorable home building conditions and interest rates remain near record lows. These positive factors support a favorable backdrop for continued execution of our effective growth strategy.”
Here are some other highlights:
Net income for the second quarter 2016 was $13.1 million, or $0.62 per share, compared to $9.8 million, or $0.46 per share, for the prior year quarter. The improvement in net income was primarily attributable to an increase in home sales revenues.
Home sales revenues for the second quarter 2016 were $257.2 million, compared to $186.8 million for the prior year quarter. The growth in home sales revenues was primarily due to an increase in homes delivered to 768, compared to 636 in the prior year quarter, and a higher average selling price of homes delivered, increasing to $334,900, compared to $293,700 in the prior year quarter. The increase in average selling prices was largely due to a shift in regional and product mix from our new communities.
Home building gross margin percentage in the second quarter 2016 was 19.2%, as compared to 19.6% in the prior year quarter. Largely due to product and geographical mix, adjusted homebuilding gross margin percentage, excluding interest and purchase price accounting in cost of homes sales revenues, was 21.1%, compared to 21.3% in the prior year quarter. SG&A as a percent of home sales revenues was flat at 12.2% compared to the prior year quarter.
Net new home contracts in the second quarter 2016 increased to 869 homes, an increase of 21.0%, compared to 718 homes in the prior year quarter, largely attributable to a higher number of average open communities, as well as an overall increase in absorption rates. At the end of the second quarter 2016, the Company had 1,070 homes in backlog, representing $406.7 million of backlog dollar value, compared to 1,005 homes, representing $348.0 million of backlog dollar value in the prior year quarter. At the end of second quarter 2016, the Company had 91 open communities, an increase of 12.3%, compared to 81 open communities at the end of the prior year quarter.
As of June 30, 2016, the Company had total assets of $971.1 million and inventories of $869.7 million. Liabilities totaled $540.3 million, which included $412.9 million of long-term debt. At June 30, 2016, the Company’s ratio of net debt to net capital was 47.0%. As of June 30, 2016, the Company had $140.0 million of availability under its unsecured credit facility and the $100.0 million accordion feature thereunder was undrawn.
David Messenger, Chief Financial Officer of the Company, commented, “We are encouraged by the healthy pace of activity in our communities year to date. Based on our current market outlook, we expect home deliveries to be in the range of 2,500 to 3,000 homes and our home sales revenues to be in the range of $850 million to $1.0 billion. We now expect our active selling community count to be in the range of 85 to 90 communities at the end of the full year 2016.”