Century Communities, Inc. (NYSE:CCS), Greeenwood Villiage, Colorado, after market close Tuesday reported net income for the third quarter 2018 ended Sept. 30 of $17 million, or $0.56 per diluted share, compared to $9.5 million or $0.37 per diluted share, for the prior year quarter. Wall Street was looking for a gain of $0.84. The gain included costs incurred by home builder acquisitions. Minus those costs, adjusted net income increased 46% to $26.1 million, or $0.86 per diluted share.
Home sales revenues for the third quarter 2018 increased 47% to $552.9 million, compared to $374.9 million for the prior year quarter. The growth in home sales revenues was primarily attributable to an 80% increase in deliveries to 1,746 homes compared to 968 homes for the prior year quarter. Unfavorable weather in the Southeast towards the end of the third quarter 2018 disrupted construction and delayed a portion of home deliveries, which the company said it now expects to deliver in the fourth quarter 2018. Average sales price of home deliveries for the third quarter 2018 was $316,700, compared to $387,300 in the prior year quarter, consistent with the company’s expansion of its offering of entry level homes. Excluding the Wade Jurney Homes, the company’s legacy regions experienced growth in home sales revenues and deliveries of 24% and 21% respectively.
Adjusted home building gross margin percentage, excluding interest and purchase price accounting, was consistent with our expectations at 21.2% in the third quarter 2018, as compared to 21.0% in the prior year quarter. Home building gross margin percentage in the third quarter 2018 was 16.8%, as compared to 17.0% in the prior year quarter, with the difference attributable to a 220 basis point impact of purchase price accounting in the third quarter 2018 mostly offset by higher core profitability. SG&A as a percent of home sales revenues was 12.8%, compared to 12.3% in the prior year quarter, largely due to increased depreciation and amortization along with costs associated with our growth, including higher sales and marketing costs, headcount and costs related to the integration of Wade Jurney Homes.
Net new home contracts in the third quarter 2018 increased 66% to 1,515 homes, compared to 914 homes in the prior year quarter, attributable to stronger demand trends within the Texas and Southeast Regions and the benefit of the Wade Jurney Homes acquisitions, partly offset by constrained selling activities in portions of the Southeast due to unfavorable weather conditions in key markets near quarter end.
Excluding Wade Jurney Homes, the company’s legacy regions experienced growth of 20% in net new home contracts. At the end of the third quarter 2018, the company had 2,988 homes in backlog, representing $931.0 million of backlog dollar value, compared to 1,664 homes in backlog, representing $689.3 million of backlog dollar value in the prior year quarter, an increase of 80% in units and 35% in dollar value.
Financial services generated pre-tax income of $1.7 million in the third quarter 2018 as compared to $0.5 million in the prior year quarter.
The board has authorized a stock repurchase program under which the company may repurchase up to 4,500,000 shares of its outstanding common stock. The stock repurchase program expires on November 6, 2020 and there is no guarantee as to the number of shares that will be repurchased. As of November 6, 2018, the Company had approximately 30.8 million shares of common stock outstanding.
Dale Francescon, co-CEO, stated, “We are pleased that the third quarter of 2018 marked another quarter of significant earnings improvement for century and double-digit percentage increases across all operating metrics. While rising interest rates and tightening affordability have created an industry-wide deceleration in housing growth, underlying fundamentals in our markets remain supportive of our reaffirmed outlook for the full-year 2018. Furthermore, we are pleased to announce a new 4.5 million stock repurchase program, which provides us with an additional avenue to enhance returns on equity for our stockholders.”
Rob Francescon, co-CEO, said, “Our year-to-date results through the third quarter are at record levels due to our disciplined approach of investing capital into attractive markets. We have remained focused on strengthening our balance sheet as evidenced by our record high stockholders’ equity of $840.8 million, an increase of 29% from the end of the prior year quarter. We continued to diversify our geographic footprint and product mix, especially in the entry-level segment. During the third quarter, we expanded Wade Jurney Homes’ asset-light, lower price point operations into Texas, Arizona, Indiana and Ohio, which we anticipate will begin generating deliveries early next year.”
David Messenger, the CFO, commented, “Our year-to-date results put us on solid footing to achieve our objectives for the full year 2018. Based on our current market outlook, we reiterate our full year 2018 expectations for home deliveries to be in a range of 6,000 to 6,500 homes and home sales revenues expected to be in a range of $2.0 billion to $2.3 billion.”