Company Overview

Century Communities, Inc. (CCS) is a prominent national homebuilder that has carved out a strong presence in the affordable housing market. With a focus on entry-level and first-time move-up buyers, the company has strategically positioned itself to cater to the increasing demand for attainable housing solutions across the country.

History and Growth

Founded in 2002 and headquartered in Greenwood Village, Colorado, Century Communities has grown from a regional player to one of the largest homebuilders in the United States. The company's journey has been marked by a steady expansion, both organically and through strategic acquisitions, that has strengthened its geographic footprint and product offerings. Initially focused on building and selling homes primarily in Colorado, Century Communities quickly expanded into other western markets such as Arizona, Nevada, and Utah in the late 2000s and early 2010s. This geographic diversification proved crucial in helping the company weather the housing market downturn during the Great Recession.

A significant milestone in the company's growth came in 2013 when Century Communities went public. The additional capital raised from the IPO enabled the company to further expand its operations, entering new markets in the Southeast, including Florida, Georgia, North and South Carolina, as well as the Texas market. These new markets provided additional opportunities for growth and solidified Century Communities' position as a national homebuilder.

Challenges and Strategic Moves

Over the past decade, Century Communities has faced various challenges, including labor and supply chain constraints, as well as increased competition in its key markets. In response, the company has focused on operational efficiencies, expanding its trade partner network, and making strategic acquisitions to strengthen its market position. Notable recent acquisitions include Landmark Homes, a Tennessee-based homebuilder, in 2022, and Anglia Homes, a homebuilder in the Houston, Texas market, in 2024. These strategic moves have allowed Century Communities to deepen its presence in existing markets and further diversify its geographic footprint.

The company's commitment to quality and customer service has not gone unnoticed, with Century Communities being named the highest-ranked homebuilder on Newsweek's list of America's Most Trustworthy Companies in both 2023 and 2024. This recognition underscores the company's dedication to delivering value to its customers and maintaining a strong reputation in the industry.

Business Strategy

One of the key factors contributing to Century Communities' success is its dual-brand strategy. The company operates under two distinct brands – Century Communities and Century Complete. The Century Communities brand caters to a diverse range of homebuyers, including entry-level, move-up, and lifestyle customers, offering them the ability to personalize their homes through various options and upgrades. In contrast, the Century Complete brand targets the entry-level market, primarily selling homes through retail studios and the internet, with a focus on providing a streamlined, no-frills homebuying experience.

This strategic positioning has allowed Century Communities to capitalize on the growing demand for affordable housing. According to the company's latest reporting, approximately 93% of its home deliveries during the first nine months of 2024 were priced below the Federal Housing Administration-insured mortgage limits, underscoring its commitment to serving the entry-level segment.

Operational Approach

Furthermore, Century Communities' focus on spec home construction, where homes are built in advance of a sale, has enabled the company to maintain an appropriate supply of quick move-in homes and provide its homebuyers with financing certainty through its captive mortgage subsidiary, Inspire Home Loans. This approach, coupled with the company's efforts to control costs and optimize cycle times, has helped Century Communities navigate the evolving market conditions, including periods of rising mortgage rates and fluctuating housing demand.

Financials

Century Communities' financial performance has been robust, with the third quarter of 2024 showcasing strong results. The company reported total revenues of $1.14 billion for Q3 2024, representing a 27.8% increase year-over-year. This growth was driven by a 25% rise in home deliveries and a 3% increase in average sales prices. Net income for the quarter stood at $83.02 million, with diluted earnings per share of $2.59. The company's adjusted homebuilding gross margin was 23.6%, reflecting its ability to maintain profitability despite industry-wide challenges.

For the full year 2023, Century Communities recorded revenue of $3.69 billion and net income of $259.22 million. The company's operating cash flow for 2023 was $41.63 million, while free cash flow was negative $90.05 million, indicating significant investments in growth initiatives.

Looking at year-over-year performance, Q3 2024 saw a 27.8% increase in revenue compared to Q3 2023, while net income remained relatively stable with a slight 0.2% decrease. This demonstrates the company's ability to grow its top line while maintaining profitability in a challenging market environment.

Century Communities operates its homebuilding business across five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. The company also has a Financial Services segment, which includes mortgage, title, insurance, and escrow services, primarily serving its homebuyers. Additionally, the Corporate segment includes Century Living, LLC, which focuses on multi-family rental properties in Colorado.

Future Outlook and Guidance

Looking ahead, Century Communities has set ambitious growth targets. For the full year 2024, the company has increased its guidance for home deliveries to be in the range of 10,900 to 11,300 homes, up from previous estimates. Home sales revenues are projected to be between $4.3 billion and $4.4 billion for 2024. The company expects its year-end 2024 community count to be in the range of 310 to 320, representing year-over-year growth of approximately 25% at the midpoint.

Century Communities anticipates further improvements in operational efficiency, with SG&A as a percentage of home sales revenue expected to decline on a year-over-year basis in 2024 and continue decreasing in 2025. The company's full-year 2024 tax rate is projected to be in the range of 24.5% to 25%.

These projections are supported by the company's expanding land pipeline, which includes both owned and controlled lots, as well as its recent strategic acquisitions. Century Communities aims to achieve an annual delivery growth of 10% or more over the next couple of years, positioning itself to capitalize on the growing demand for affordable housing in key markets across the United States.

Liquidity and Risk Factors

Despite the inherent risks and uncertainties associated with the homebuilding industry, such as fluctuations in interest rates, material and labor costs, and economic conditions, Century Communities has demonstrated its resilience and adaptability. As of Q3 2024, the company maintained a strong liquidity position with $149.16 million in cash and cash equivalents. The debt-to-equity ratio stood at 0.54, indicating a relatively conservative leverage position. Century Communities also has access to an $800 million revolving credit facility, with $414 million outstanding as of Q3 2024, providing additional financial flexibility.

The company's current ratio of 2.14 and quick ratio of 0.62 as of Q3 2024 suggest a healthy short-term liquidity position. These metrics, combined with Century Communities' focus on entry-level and first-time move-up buyers, operational efficiency, and disciplined financial management, have enabled it to navigate industry challenges and deliver consistent financial performance.

Conclusion

In conclusion, Century Communities' unique positioning as a leading affordable homebuilder, its dual-brand strategy, and its strategic initiatives have positioned the company for continued growth and success in the evolving housing market. With a presence in 18 states and a growing portfolio of over 80,000 owned and controlled lots, Century Communities is well-equipped to meet the increasing demand for attainable housing solutions across the United States. As the company continues to execute its growth strategy and maintain operational excellence, it appears well-positioned to capitalize on market opportunities and deliver long-term value to its shareholders.