Century Communities, Inc. (CCS)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 saw softer demand and higher incentives, with total revenues of $903.2M, GAAP diluted EPS of $1.26, and adjusted EPS of $1.36; management highlighted economic uncertainty, rate volatility, and declining consumer confidence as key headwinds .
• Both revenue and EPS missed S&P Global consensus: revenue $903.2M vs $912.4M*, adjusted EPS $1.36 vs $1.71*; GAAP EPS was $1.26, accentuating the miss. Management guided Q2 margins lower on incentives rising up to 200 bps and Q2 deliveries of 2,300–2,500 .
• Full-year 2025 guidance was cut: home deliveries to 10,400–11,000 (from 11,700–12,400) and home sales revenues to $4.0–$4.2B (from $4.5–$4.8B), reflecting slowed spring selling and affordability constraints .
• Balance sheet remains strong (stockholders’ equity $2.6B; liquidity $787.5M) and capital returns continued: dividend raised to $0.29 and 753,337 shares repurchased for $55.6M; unsecured facility capacity increased to $1.0B .
• Near-term stock reaction likely hinges on margin trajectory (incentives), absorption pace, and the lowered FY guide; community count growth supports H2 volume, but Texas softness and April demand pause are watch-outs .

What Went Well and What Went Wrong

What Went Well

• Community count grew 26% YoY to 318, underpinning medium-term delivery capacity; lot pipeline remains ~79k total lots with 55% controlled, supporting a land-light model .
• Cost controls: direct construction costs declined ~4% YoY; cycle times held at ~4 months; finished lot and construction costs were flat sequentially, supporting relatively stable gross margins despite incentive pressure .
• Capital allocation discipline: increased quarterly dividend to $0.29 and repurchased 753k shares at ~13% discount to book value, while expanding the credit facility to $1.0B .
  • Quote: “We had continued success in controlling our costs… our direct construction costs declined by 4%… cycle times remained at approximately 4 months.” — Rob Francescon .
  • Quote: “Our community count grew by 26% on a year-over-year basis to 318… our balance sheet remains strong with $2.6 billion of stockholders’ equity.” — Rob Francescon .

What Went Wrong

• Order activity and absorption softened vs expectations due to macro headwinds; absorption averaged 2.8 in Q1 and trended below in April, prompting higher incentives and a lower FY 2025 guide .
• Incentives stepped up to ~900 bps in Q1 and are expected to rise up to another 200 bps in Q2, pressuring gross margins sequentially .
• Regional mix challenges: Texas underperformed with weaker absorption (2.1), weighing pace; backlog value declined YoY to $521.1M and backlog homes fell 21% YoY to 1,258 .
  • Quote: “So far in April, our absorption rate is trending below first quarter 2025… elongated sales cycles caused some homebuyers to pause.” — Dale Francescon .
  • Quote: “We anticipate second quarter incentives to increase by up to another 200 basis points… margins could be off in Q2.” — Rob Francescon .

Financial Results

P&L and Margin Comparison

Operational KPIs

Q1 2025 Actual vs S&P Global Consensus

Values marked with * retrieved from S&P Global.

Segment Breakdown (Q1 2025 vs Q1 2024)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our absorption rate in the first quarter was weaker than we had expected… elongated sales cycles and [pausing] homebuyers… We still firmly believe there is underlying demand for affordable new homes.” — Dale Francescon .
• “Incentives on closed homes increased to ~900 bps… we anticipate second quarter incentives to increase by up to another 200 bps… largest driver of changes to our gross margins near term.” — Rob Francescon .
• “Pretax income was $53M and net income was $39M or $1.26 per diluted share… Q2 deliveries to range from 2,300 to 2,500 homes… homebuilding gross margin to ease sequentially due to higher incentives.” — Scott Dixon .
• “We repurchased 753,000 shares… at a 13% discount to book value per share of $84.41… increased capacity of our senior unsecured credit facility to $1B.” — Scott Dixon .

Q&A Highlights

• Incentive strategy: Mix of price reductions on completed spec and mortgage rate buydowns; Q2 incentives expected to rise up to 200 bps to support absorptions .
• Regional dynamics: Century Complete more stable given less direct competition; Texas regional absorption weakest at 2.1, dragging pace .
• Back-half volume: H2 closings expected to benefit from community count growth despite flat assumed absorption, supporting sequential delivery increases in Q3/Q4 .
• Pricing and buydown levels: Rate buydowns in mid-5s during Q1; incentive split approx. 55% price/45% mortgage, could shift with rate volatility .
• Cost actions: Mid-April workforce right-sizing and other cost programs to lower fixed costs; benefits weighted to Q3/Q4 .
• Supply chain/tariffs: No current direct cost impact expected; monitoring for potential disruptions .

Estimates Context

• Q1 2025 missed consensus on both revenue and EPS: revenue $903.2M vs $912.4M*, adjusted EPS $1.36 vs $1.71*; GAAP diluted EPS was $1.26, further below consensus levels . Values marked with * retrieved from S&P Global.
• With the FY 2025 guide lowered (deliveries and revenue) and Q2 margins expected to ease on higher incentives, Street models likely need to trim H1/H2 revenue and margin assumptions and reset FY EPS accordingly .

Key Takeaways for Investors

• Sequential margin pressure likely in Q2 from higher incentives (+~200 bps) even as construction and lot costs hold flat; watch for gross margin cadence through Q3/Q4 .
• Demand softness and affordability constraints (April pause) drove a meaningful FY 2025 guide cut; absorption stabilization is the key near-term catalyst .
• Community count growth and lot pipeline support H2 volume recovery, but Texas weakness needs remediation to avoid mix-driven margin headwinds .
• Balance sheet flexibility preserved (equity $2.6B; liquidity ~$788M; unsecured facility to $1.0B) enabling both growth and continued capital returns (dividend up; buybacks ongoing) .
• Backlog improved sequentially vs Q4 but is down YoY, suggesting near-term visibility is modest; monitor orders and backlog progression as rates fluctuate .
• Non-GAAP adjustments (adjusted EPS/margins) moderate headline declines; however, GAAP metrics and rising SG&A % indicate real near-term pressure on profitability .
• Near-term trading: stock likely sensitive to monthly order trends and incentive disclosures; medium-term thesis hinges on executing a land-light growth plan while preserving margins amid affordability volatility .