CCS - Earnings call transcript Q1 2020 | Century Communities, Inc.

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Operator

Greetings. Welcome to the Century Communities First Quarter 2020 Earnings Conference Call [Operator Instructions].

As a reminder this conference is being recorded. I will now turn the conference over to Hunter Wells, Vice President of Investor Relations for Century Communities. Thank you.

begin. may You

Hunter Wells

you first Thank us for today Good XXXX for earnings Communities quarter conference Century afternoon. joining call.

call the Before the that of historical the in current everyone may to beliefs, statements risks constitute to in like based forward-looking this information course statements. and and management's call that begins, certain I could statements. differ statements would uncertainties are on not are These remind or and from forward-looking cause subject described to on based results are expectations and actual materially those of a number implied made

and Certain as of XX-K filed these under can risks most report in annual uncertainties supplemented factors by heading the recently company's the risk our Form found other on be filings. SEC

at www.centurycommunities.com. site available to our Our made that duty no SEC The undertakes any this www.sec.gov at forward-looking update statements during are are Web and company call. filings

Additionally, not GAAP. in should not certain The the any will be of call. have measures substitute with a presented presentation this financial after the discussed available did to will you conference questions this for information intended get in be on non-GAAP that or as financial accordance information Management answered. be is company's call isolation considered

today Dale Chief call Officer; and Chairman Financial Executive and David Officer. Co-Chief Rob the Hosting are Messenger, Francescon, Francescon, Officer; Co-Chief Executive

Following today's for prepared remarks, we will line open up questions. the

over call Dale. turn to that, the will With I

Dale Francescon

reaching it national unknown, of is full will including have last earnings has COVID-XX are There three every the the good everyone. United the business we changed economy escalated crisis. to industry person, just afternoon and impact on Since health call our and And this quickly across into as States. crisis Hunter. our ago, global spoke pandemic regarding on dramatically Thanks, operating in the we months that and living remains which implications world you the far much

servicing our that state which challenging this allowed home most continue time. homebuilding and as buyers essential is has We us are governments, local to during fortunate deemed business by

continue team sell, ingenuity homes have across our to daily to build, displayed enabled us platform. addition, impressive enclose national In members that has our

acknowledge disruptions fully months in we the the Century that and toward caused hand the uncertainty While and endemic. Communities by challenges is lie well-positioned COVID-XX the the resilient ahead, at

describe near-term actions enable to commentary additional steps as continue development. we've the Rob taken some fortify some I'll Today, provide expectations of we've to acquisition land well our Century customers, our and and for streamlining business, to implemented including servicing as our strengthen will operations. on

you strong our will Dave results, full discuss Finally, take balance our through year first our outlook. sheet and review quarter

for your We will open then the line questions.

value Not long X,XXX expectation. increase ago, revenues new XX% X,XXX first the March sales we resulted Even deliveries in over ending million, year achievement quarter, and in the contracts you with sales and of of the history optimistic $XXX.X activity, our sales generated sales robust the shared home of in January X,XXX dollar an impact from of $XXX in COVID-XX the prior in year full homes variety of most records performance including the during still quarter. quarter the homes of strong a with backlog a and This with million. company's net affecting we growth contracts

coronavirus an unpredictable created The and has landscape. ever-changing

homeowners on team supportive maintaining our and entire existing members, is team for Our customers, partners. focused trade leadership intently safe and conditions

to virtual such for challenges appointment affecting capabilities contracting trade our We within only building home, have selling limiting zones. quickly home buyers sales adapted to visits as processes, home partners the and and and restrictions our and our scheduling online

we resources, suite Communities purchase of providing to variety to these meetings, from our are across migrated throughs in terms transferring adapting Century experience We this and via email, a video shop calls. our contracts virtual Century a of online. processes, our online and create increasing potential our completely buyers ramped which action, appointments earnest for already walk full entire Complete and In sales tours, quickly online was we're resources utilizing now homes brand enable portfolio. and to of phone, also with and buying of In seamless signing person lieu home buyers engagement a tailored and money text, uniquely resources video deposits Through electronically.

total the weeks the digital as an compared in April saw traffic to our same were of compared Web to week up of same period the response in for the prior site year. We last increased period XX% first with efforts three company quarter first year. XX% the three Web traffic

our increase in with pleased virtual service reflects experience. buying transition We to web which successful traffic, this highly are home a full

mortgage our of and to closing virtual equipped range home full online necessary meet even fully the application insurance approval demands and of loan the capabilities These Additionally, pre-qualification the title way and buying. to companies through from the are to all home.

them We effective experience. online an the are and financing to home able distantly buying our entire one-stop providing for process customers, closing facilitate

time. adapt to to ability commitment during online tools utilize allowed us and array this Our our customers impressive our challenging our has continue servicing to of

us passed. While we’re ways that will operate efficient we stronger adjust have long more to competitive our and make caused way this crisis more these to the developing recent events after organization has business, run our

and Even for continued has with lows, positive home this of continued the buyers. environment Our which closing continue a majority to XXXX. of tightening in be is sales efforts expected rates to the mortgage with and rate interest into year vast mortgage successful occurred and qualifying in balance historical supported at to market, be our the have credit we that the dislocation by

be from uncertainty sales, up better and far so for held impact week. each demand to our has than clearly less sales than April with net restrictions anticipated. April sales sequential are down Net trending from and have the the both homebuyer While the increasing gross affected XX% surrounding virus XXXX

cancellations now each this week consistent they declined with and date in elevated March, to year were While average. month our have are

states This experience through sales coronavirus adjustments loosen and we April to the related the our have a as and declining weathered. leadership pace beginning first these to cancellation the number turbulent team, to navigate is well by not the restrictions have economy. as times. along encouraged and reopen I, increasing are rate, make We with of their entire storm Rob our seeing necessary

Given and sheet across an attractive national competitive platform, growth, with and in liquidity drive our ample we position strong balance our to performance confident for our long-term deliver ability value improved our operational shareholders. create meaningful are

call turn now will the I Rob. to over

Rob Francescon

you, Thank everyone. afternoon good and

across our platform As strong into of the March. Dale remain demand discussed, beginning national

business. However, caused take fortify quickly us we and the significant during shift traffic month. steps decelerate This activity saw to strengthen sales and our the half of second to

to with technology also aid the home COVID-XX an to continuation took endure the resources flow pandemic. of liquidity to virtual the online of ensure from demand our sales In and to in company enhancing extended and period and positioned cash action our that stemming was addition closings, we lower

new and business exceptions are close starts are that Century Century Complete our where communities The confident with First, spec spec them we in we eliminated in starts the in have home. and the reduced will and remain we markets few Communities brand. sell

construction. the to are where efforts continue spec loan sales we have our approvals, appropriate focusing sell and already we deposits on and current under pre-sold homes we start homes While

longer a lots Second, to controlled heightened our fourth that the successfully Of XXXX. of end criteria, we lots which we controlled number we our of most quarter, development. reduced Toward have worked that met compared the closing no quarter in controlled extend to the expected remain, the cases dates. adjusted of to first acquisition number and the reviewed pending of land have land acquisitions our terminated pipeline and approach positions

owned number Our of lots increased sequentially.

we now with And of as needs. exception land other of the rolling needed all option own year of the Complete for balance and this the as certain well next Century finished of vast majority year's transactions, the lot

XX% land are the market anticipate home slowed of to We finished. will and demand. better stopped understanding or the we affect longer-term on development have this visibility once have adversely until of which ability as not business to our also owned lots stabilizes, of course we intend the and grow pandemic impacts near buyer activities, already continue We our the do nearly

workforce environment. to variety including a we was given monitor this costs operations intend April. Lastly, opportunities felt reduce We for reduce in to difficult necessary additional uncertain expenses, reduction our to in closely our control We our to designed extremely the continue a economic layoff decision actions and operating of of through current instituted to the size expenditures. have and the staffing targeted cash limit

COVID-XX only also customers, practice their homeowners We pandemic, as our trade are to business to of recommendations evolving order committed safeguard employees, best sustaining in operations also our resolutely families. and well as the safety global not regarding adhering this partners, through to health and but

the From to single crisis, team focused continue extremely the be Communities so. first been have escalating call steps our this our today's has reported of employee members immediate fortunate team that any of doing our knowledge to Century we coronavirus. on and contracting We as not protect reports leadership took XXX% health of to

As is we management the Dale experienced, through tenured successfully our mentioned, and first team before. have this has of crisis cycles distress not operated

buyers economic affordable points. conservative tend homes more be to uncertainty, price times purchase of more In and at

on dream low securing know a the rate. of target mortgage Our buyers record value home pursuing are their intent of and ownership

of to detailed ability on in homes. financial confident now the and who a over turn profitably I outlook. and will will update are continue We provide building selling, our our results closing Dave call

David Messenger

Rob. you, Thank

diluted to improvement to revenues was per and $XX.X to quarter driven Home record $XXX.X a During of net X,XXX to deliveries This for increase and $X.XX increase or income company compared XX% a million in sales share. the million quarter increase a new to first diluted year prior income XX% million record an to net increased a revenues X% share XX% $X.XX homes first by in quarter of first a net of home record in million, XXXX, quarter. or per XX% our the X,XXX. adjusted contracts the increased record $XXX.X increased $XX.X in

quarter, to delivered price in first of buyers quarter selling $XXX,XXX $XXX,XXX price which XXXX average plan to increasing compared The an the of entry our level of year to home consistent decreased and points. share capture for prior with homes is the

we Given gross an in both margin increased outsized year the increased and our conversion our and backlog demand experienced that sequentially. market, over drove we rate year successfully

our related margin Adjusted up. company. revenue in to efforts to the SG&A is basis gross expense a that prior of of first our result the pretax of close XX points in year impairment This operating homebuilding margin sales quarter of increased XX.X% first leverage compared $XXX,XXX percentage to as in gross year. quarter was was excludes percent continued homebuilding XXXX prior community quarter. one of the the a non-cash XX.X% in in and XX.X% compared onetime improve Adjusted to past the a XX.X% to home

business contributed mortgage services of financial which the revenues, over insurance the title, $X.X prior in in our year business quarter. The income $XXX,XXX In up million quarter XXXX, XX% year in first $X.X and million pretax year. of to compared generated

were results QX turbulence in the of Our that March. the last negatively in credit impacted two markets by weeks the occurred

unrealized our valuation a incurred As loss. non-cash hedge result, $X portfolio million

During April, recouping valuation we been as have have credit the begun markets to stabilize. loss this

strong Now a balance challenges weather We ended turning our COVID-XX financial liquidity. sheet to with position the the pandemic. to to quarter and related the

first revolving quarter under credit the this and a facility down as the period it's monies XXXX, During company during uncertainty. drew additional of measure disruption proactive

us a with total that well-positioned cash $XXX.X credit the discussed, of million, environment. the balance and Rob our our conservation cash necessary cash current provide on and As we we is $XXX result, of million believe sheet ended current in liquidity quarter to our facility. measures availability flexibility Based including the balance under the million $XXX.X of

We operations and our we'll to make further closely as adjustments monitor appropriate. continue will

XX, As March stockholders' XXXX, billion and $X.X was of of total liability billion, assets $X.X equity we $X.X had billion. totaled

slightly prior XX.X% increased and the at XX.X% to in Our net year significantly capital quarter. to homebuilding XXXX down the end compared XX.X% of debt-to-net from

leverage Given XX.X% estimated we in in to the credits. to expect have due forward. our quarter In measures of continue primarily rate the progress the our prior we go as we make year, put in was first the compared quarter, XX.X%, proactive to place, $XX reducing to tax same

year expectations. the of inline trends were the through quarter the months For first with two XXXX, first of company business

and COVID-XX health pandemic many government safety have to real changes local unexpected and our are experienced by updated as reached Mandates wellness time we a However, all levels to and business. being national the guidelines by continued change authorities. basis at the level, on of global day

COVID-XX across the widely estimated the being ultimate shelter-in-place currently. related at our demand effects of is the Furthermore, of varies country Therefore, truly impact and markets timing unknown home buyer large. lifted the restrictions economic and of

related our quarter. one As item year we communicated financial to such, do to discuss XXXX. want withdrawing are outlook previously full second the for I

decision the approximately we'll charge and for million. associates a $X made lay-off previously recording number April, As we to mentioned, in a of severance our be

as the additional our on the interim, and times our ever our before. more strength and look team questions. Communities are will help the that and These we than capital we will are With of periods unprecedented updates visibility. in I'll for us business to come Operator? the resources open stronger gain to In of we line this out Century talented confident succeed provide disruptive business, that,

Operator

Instructions]. [Operator you Thank

Our the from of and Maguire with first line comes Thomas Zelman Please with question. proceed question your Associates.

Thomas Maguire

also part growth. quarter had April encouraging. dig about net you talk Can the and sequential And commentary the guess of is glad there side think everyone you the I is is Great in driving and the cancellations, healthy. just there in was improvement really safe about obviously you activity? comment and first, in but what

consumer do the So you pullback what comfortable if impact just with engage do And could months, more the you at think broadly, spoke that all? to orders in getting future Century? how is think to you

Dale Francescon

terms more comfortable, our we're of making what's things. ramped circumstances. in up doing think couple So of I the We've tools. now lot adjusting of a it's sales job to I a better it virtual think One, a

recognize getting out think time. the the being is are end with the while restrictions comfortable more all it's I that. everybody candidly, about. way go, that there's shock, starting of just, world. are to people we're There more not long And a really are salespeople after Our people seeing feeling initial still the loosened And it's to and

have comfortable of deliver declining a interest them cancellations, really of terms a home our our spent to buyers, we've buy home. construction. at if focused in a under we've making again And this efforts than a quickly to great we them salespeople low selling much a And result lot is time And the with reminding be as with on home more that our but and sales what are homes were rates. built our time

far our that future then time, that. settles the that keep months, market. if everything continuing what and more really of fair we building one probably expect a with And eye very of we amount we comfortable close As as to a is homes We're in construction. feel under period some specs. now a that's for that have we even to is on We're we've the wanted make again. sure backed stabilize before we of done off right start additional up things But on we'll start we've everything out specs to would where starting

Thomas Maguire

of And number moving quarter what then and a basis just net on in more product about even buyer back the function buyer I first Century, move you're lot you the remarks? for reporting. a little a that think is environment? the to that just a look it product in for issues the results, Can you relative maybe broadly, cancellations Is obviously you how but behavior do financing versus about the first Or a pieces, and difference core Complete talk the weaker that? entry up in we're that prepared of at this seeing of of of guess to some spoke to level Century more

Dale Francescon

know, things. One, changed You we sale. two it's how count really we've a

the count So sale that up because deposit have execute longer approval. we a initial no what online, now puts as deposit up their $XX is contract, sell balance a we when put their a until conditional do we and and they they we loan buyer a of

that we a if a than works that. right have we upfront. more of lot counted But lag a process bit little time have found we that So with smoothly

affected one the sold at we that quarter. to group of group right the the homes of had we had canceled were a that results investment that thing other end is The

two those the are things rate. drove really So what sales reduced

buyers go In the that terms qualifying. qualification, is certain a of that we But the we through challenge general in have and face. we buyer as that obviously a have not challenge

Century XXX. Complete our above on buyers In score is of fact, average FICO the the side

Operator

the Morgan. with question. with question Rehaut JP Michael Next Please your proceed comes from of line

Unidentified Analyst

is [Maggie] Mike. This for on

on products. traditional First guess versus branded Century the I question another Complete Century

sequential one each are other Is versus improvement more? the could buyer different I improving color traditional and April As you improvement the week. about between product, give product you any the Century that guess Century pretty consistent talk or and Complete groups. seeing the the about you

Dale Francescon

it the Actually, we're across seeing board. really No. [Maggie],

And the cancellation rate so reduction Complete the our that both improvement thing across same in Century in with that as seeing we're we're product, is Communities well seeing really The as the Century traditional portfolio product. as well. in the

Unidentified Analys

if the wondering give of reduction? And spec magnitude you've reduced maybe that of an could Complete was the then I Century you number of in you mentioned And brand. starts idea that

Dale Francescon

the that just That that are site business, the nature on those be we that. do starts because just don't first set all pre-sales up, for isn't we It and the business. really of would start spec of up

So, is, when point not average price those It's just a give pause. selling we about look at where everything wanted we're our to really we homes. concerned

then feet that'll the we'll part be us our business get Just that and the first underneath building specs. start of

Operator

comes FBR. question with of Please with proceed the B. next Alex Rygiel Riley Our your from question. line

Alex Rygiel

it's up about month tightening Dave, in upon Yes, that loosened and everybody's quarter. mortgage has nice could happy the expand of hear and first to maybe your very market April? comments how the healthy you

David Messenger

had job losses, has saw then, in Since governments seized. March really markets people Everybody of that of you credit had else wide the when forbearance, you out. the middle dried liquidity come issues up, having

markets. back liquidity have in We the

banks all of We've had well. liquidity more market investment from but from sudden pushback the buying We You a mortgages. got you’ve manner. side the warehouse not have no investors in see some forbearance. only a regarding traditional rules as And in from market, the acting

was weeks normal market see compared to acting a call what it we the bit ago. just six it more so, And

Alex Rygiel

of a than mentioned about increased actions of with of suspect each think also in another? savings there are you managing should number other cost the offset costs? increased cost April, is were expense Dave, we then related. or I this greater associated headcount COVID. How related, costs versus the with sort month savings Do one they there And

David Messenger

to I'd And right under as in company, difficult they if say, that obviously made it's any of there's to maybe going our the offset it extent, would other microscope throughout we some some at country. say decision that a we the look each with on I staff but spending now. discretionary the lay-off

And that on. so, we're go watching definitely dollars any

increased that’s that is that other for evaluating in was necessary costs we're have. number supplies where additional given a whether say you spending it's I we versus dealing have COVID the some in new business any for nice terms that but So it are and too queue, the can of we had to significant have, There us. with contracts, what people really of was just wouldn't what been

Alex Rygiel

how XXXX in lastly, And land on purchases and I suspect spent to you relates as land XXXX. be bracket of obviously it’s versus got purchases down. sort given any land are much you In it going eliminating actually cash year to two you’ve quantify hand way of it be comfortable the already? backlog your this in with down how could and could year

Dale Francescon

to don't if comfortable think to have case. the that's going I eliminate we be We're purchases, land

land that into year. controlled bit that will that’s there's towards really But basis, an at as a the But end not I of are finished, we're in since on start as on finished sometime to on until by the to that think falling this well forward feel shakes as and out on loss rolls up So prepared top this needed go a open year. the our going as side, things little of this we the lots basis XX% roll own year, how think of comfortable with that. we the pretty demand get we have are I And point. we out further side see

Operator

Our with question. comes Jay with next question your McCanless from proceed line the Please of Wedbush.

Jay McCanless

year? was us the and last how XQ you I for The cancellation rate what give that to had. first question compare Could XQ actually

Dale Francescon

was first look down And we XXXX, We XX%. March by a we're when our cancellation this through to If to year we was April So back last look look XX%. at year, year XX%. January at our the April, quarter look from itself, rate cancellation at rate of at rate at date XX%. was cancellation we

at four down at So if it exactly the over which which of stood we're year. from where is quarter, we of is we look first end the the first the we this XX% months point at where last stood year,

Jay McCanless

sequentially, with guys next I and by backlog higher we issues expect The that's average year guessing and less on saw a talked are sequentially backlog we the about. price like quarter had, average question just your price this cancellation XX% building almost side? you you deemphasizing is the mix Should year over as I’m fleet

Dale Francescon

really a And deemphasizing, has No, all. expect I of for just that starts with it wouldn't that at time. not it's to period which we're do

ASP so, mix. to the forward. strictly backlog is change significantly going is on I expect wouldn't And based our go we that as

Jay McCanless

from I with you Century far it's your incentives incentives the then fee buyer all touch seeing what can that? whether what And maybe on on higher as or you are competitors, product doing incentives some you co-book if core guess and as are

Dale Francescon

do the our I any there's specs, that And we've doing and of buy not are seeing that's of And to talked playbook, or that Yes, people as We're our to flexibility we're all are case the of needs co-book, particular they buyer those not considered is crazy in all to extraordinary, that doing. little you what competitors to really the what doing the all part we're do not need. that additional home. that given focused divisions competition our that. anything about where of seeing it's the house-by-house marketplace of It's down would we're and a really and anything really selling a be on to that. bit incentives,

Jay McCanless

you whether come are either prices. what land competitors your the Then down it’s product on on or or seeing for right those prices, Are doing from of prices now?

Dale Francescon

we for to an really sellers for We've off closings, on period pushed what There No, a pretty have thing. land doing on gone an This period not the seen extended accommodating. And same this from has land Obviously, been adjustment land our time. short of true push affecting not the But the I and downward prices. with seen think a prices And prices. expecting just on of we're that goes now, market. time. will of home only on time, that thing unless a same a We as on we've hasn't there's timing on talk goes haven't Right long been it's start really. land affected there, closings. to peers they're prices. holds lot the of it if for inventory really

things that One well inventory occurring that's of the the off of the as come is has a resale lot market.

homes favoring they're because So for are in. really is somebody a more people home newly well, built as comfortable going living where

those of there's of so, homes And things pretty holding really lot all now, up the of right our benefits are prices well. a and

Operator

comes of your Barron question. with Research the Alex Our Center. proceed next with line from question Housing Please

Alex Barron

wanted stuff. about times affected homes the much? distancing social with to I ask time bill the of Has between construction workers and that

Dale Francescon

running result partners an anything been be trade and effect smoothly Things that of everybody and detrimental. that seen the seen that. But different sites on fairly up have not really protocols this. a have we times, have as not embracing on on showing of we No, there's cycle job our seems as to course,

Alex Barron

Internet. And that shopping I of used as kind far Century brand more the on the to on as window Complete, clients guess rely

So that has that or these way the it's much days being sold not? changed in

Dale Francescon

No, it all. hasn't changed at

a sold already on In one that advantages basis. fact, virtual that's the we've of

bit and it to at community on able and And look take we that so side Century the expertise been we've really an that, developed well. we've move of that to a over as when expertise

Internet done. product always at So terms is that focusing that in what everything when on we over look is of line the selling

the able to on take we've taken we've been more and of we've over. to of on And those so as complete that side, that some learned in things the century century moved

enhanced it's So it overall. really

Alex Barron

other seen a XX%. in to XX% last neighborhood than you know, your think some in more don't of have probably guys I drop lot last few the One question, sales the competitors I of weeks

why doing are is what value think that offering differently, down or main you about guys proposition only do are do So you sales think XX%? clients, what you you guys are the your

Dale Francescon

it to cases, rates, to XX% becomes with part low buyers, our is When very point price in that In be consider homes our entry fact in of of it think offering I our couple and buyers sell. level. I attractive. that about don't would most is interest you what many you have cases, take

can't So a a where in lot they makes they're and not it they're sense. an move, apartment situation of in

You know, into they home, of out want be environment. to their move denser able a to move own

to And have experienced we positioned product the walking related not virtually. I into with door from think walking couple we selling experienced through that that models is perfectly end the you for that. to then someone have that fact online, And other. selling our the It's one all and

the we So all when very we look set exist. currently way the and think at for that of well up that, situation I sell is that our product offering

Operator

hand questions further in closing for back no the Francescon like to the I'd are There Dale queue. to call remarks.

Dale Francescon

to entire We which you, efforts impressed of these be not adapted has could Thank by more organization, extraordinary the our Operator. truly times. challenging quickly

dedication thank quarter want to We forward valued team during commitment serving today. and leadership team, first buyers. hard home these speaking you work our And our next continued display quarter. us have seen support unprecedented unwavering everyone times. look sincerely entire continued we call on We appreciate them behalf and of tenacity conference you and to and investment, your to to again joined who's our their for to an unparalleled On members thank

Operator

for teleconference. does Thank you your gentlemen, participation. and conclude Ladies today's this

time disconnect your at and this wonderful may have lines day. a You

Century Communities (CCS) 29 Apr 202020 Q1 Earnings call transcript