Century Communities, Inc. Q1 FY2026 earnings call

• Despite market pressures, operations performed well. First quarter adjusted gross margin increased by 140 basis points sequentially, community count grew by 4% versus prior quarter, finished specs at end of first quarter down 16% sequentially and 31% year over year.
• Sales: Quarter started healthy, absorption rates had sequential increases in Feb and Mar but Mar declined year over year, net new orders 2,379 homes, traffic increased each month in first quarter, cancellation rate 12.2% below 2025 levels, order activity in Apr trended better than Mar.
• Operations: Direct construction costs on delivered homes declined 2% sequentially, cycle times averaged 114 calendar days, down 15% from year-ago quarter, finished lot costs decreased 1% sequentially, started 2,749 homes in advance of spring selling season, ended first quarter with 316 communities up 4% sequentially.

Home sales revenues for the first quarter were $734 million. Land sales and other revenues totaled $33 million. The first quarter 2026 gap home building gross margin was 17.8%, increasing by 240 basis points over fourth quarter 2025 margins of 15.4%. Adjusted net income was $26 million or $0.88 per diluted share. Average sales price was $365,000 roughly flat on a sequential basis.

• Second quarter 2026 deliveries expected to range from 2,200 to 2,400 homes with further sequential increases in third and fourth quarters.
• Full year 2026 home delivery guidance reduced by 5%, now expected to be in range of 9,500 to 10,500 homes, home sales revenues expected to be in range of 3.5 to 3.8 billion.

• Geopolitical issues, economic uncertainties, higher interest rates and gas prices eroded consumer settlement and weighed on order activity.
• Slower market conditions require balancing pace and price, controlling costs and inventory levels.
• Only 11 of 316 communities, or roughly 3%, utilized a land bank, but still some exposure risks.

Q: Can you comment on how you think your competitors and your markets have adjusted their spec inventory? And how do you feel about spec inventory just broadly across all your portfolio?

A: Scott says generally optimistic with where specs are from a finished perspective compared to 2020, focus on community level for pricing and consumer demand.

Q: At what point do you think Sentry sort of reaccelerates its geographic expansion?

A: Focus is growing within existing footprint to be top 10 or higher in markets, would look at new markets secondary.

Q: Have you received any communication regarding potential cost increases or field surcharges from your vendors? And if you have, do you think it's something that could be negotiated or do you expect a reacceleration in cost inflation towards the latter part of this year or even heading into next year?

A: To date, been able to avoid price increases, costs down 2% on directs, hope prices get back to normal.

Q: Are you able to provide more detail about the land sale?

A: Single transaction in Southeast, opportunistic, more of an opportunistic item.

Q: Were some regions of the country affected more than others? And then as you think about trying to hold the line on pricing, I mean, right now, is it still pretty aggressive incentives out there. You said 12 and a half percent, I think this quarter, you're expecting maybe the same for second quarter. I guess, what are you seeing out of competitors? Are they still leaning in pretty aggressively on incentives as well? What's happening there?

A: Southeast very good, Bay Area in West slowest, market driven by incentives, peak maybe end of last year, tempering slightly, other builders messaging pullback but needed to move houses.

Q: I wanted to, you know, kind of get a sense for sales pace in April.

A: April started out better than March and trending higher, both sequentially and year over year.

Q: With the expectation that incentives will be flat in 2Q versus 1Q, is that something that you think can hold as long as sales pace also kind of holds on a year-over-year basis? Or are there markets that you're kind of watching right now? in terms of, you know, inventory levels or competitive trends that, you know, could potentially, you know, make you rethink the incentive approach if, you know, sales pace doesn't hit a certain level?

A: Fairly comfortable incentives will be flat from Q1 to Q2, plays out at individual subdivision level.