NVR, Inc. Announces First Quarter Results

Rhea-AI Summary

NVR, Inc. reported a net income of $248.8 million, or $63.21 per diluted share, for Q1 2021, marking a 42% increase compared to Q1 2020. Revenues rose 29% to $2.04 billion, driven by a 26% increase in new orders to 6,314 units and a 20% rise in settlements to 5,072 units. The average sales price of new orders improved by 10% to $410,500. Homebuilding revenues were $1.96 billion, and the gross profit margin increased to 19.7%. Mortgage banking income before tax soared 411% to $58.6 million due to higher mortgage volume.

Positive

• Net income increased by 42% year-over-year to $248.8 million.
• Revenues rose 29% to $2.04 billion, reflecting strong demand.
• New orders increased by 26% to 6,314 units.
• Settlements increased by 20% to 5,072 units.
• Gross profit margin improved to 19.7% from 16.8%.
• Mortgage banking income before tax increased by 411% to $58.6 million.

Negative

• Effective tax rate increased to 20.3% from a benefit of 8.9%.
• COVID-19 uncertainties may impact future operations and financial performance.

RESTON, Va., April 21, 2021 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its first quarter ended March 31, 2021 of $248.8 million, or $63.21 per diluted share.  Net income and diluted earnings per share for the first quarter ended March 31, 2021 increased 42% and 41%, respectively, when compared to 2020 first quarter net income of $175.7 million, or $44.96 per diluted share.  Consolidated revenues for the first quarter of 2021 totaled $2.04 billion, which increased 29% from $1.58 billion in the first quarter of 2020. 

Homebuilding

New orders in the first quarter of 2021 increased by 26% to 6,314 units, when compared to 5,015 units in the first quarter of 2020. The average sales price of new orders in the first quarter of 2021 was $410,500, an increase of 10% when compared with the first quarter of 2020.  The cancellation rate in the first quarter of 2021 was 10% compared to 21% in the first quarter of 2020.  Settlements in the first quarter of 2021 increased by 20% to 5,072 units, compared to 4,230 units in the first quarter of 2020. Our backlog of homes sold but not settled as of March 31, 2021 increased on a unit basis by 42% to 12,791 units and increased on a dollar basis by 51% to $5.20 billion when compared to the respective backlog unit and dollar balances as of  March 31, 2020.

Homebuilding revenues of $1.96 billion in the first quarter of 2021 increased by 26% compared to homebuilding revenues of $1.56 billion in the first quarter of 2020.  Gross profit margin in the first quarter of 2021 increased to 19.7%, compared to 16.8% in the first quarter of 2020.  Gross profit margin in the first quarter of 2020 was impacted by contract land deposit impairments of approximately $36.4 million, or 234 basis points of revenue.  Income before tax from the homebuilding segment totaled $253.4 million in the first quarter of 2021, an increase of 69% when compared to the first quarter of 2020.

Mortgage Banking

Mortgage closed loan production in the first quarter of 2021 totaled $1.41 billion, an increase of 25% when compared to the first quarter of 2020.  Income before tax from the mortgage banking segment totaled $58.6 million in the first quarter of 2021, an increase of 411% when compared to $11.5 million in the first quarter of 2020.  This increase was primarily attributable to increased mortgage volume in the first quarter of 2021, coupled with income in the first quarter of 2020 being adversely impacted by disruptions in the mortgage markets related to the COVID-19 pandemic, which resulted in a  reduction in fair value of mortgage servicing rights.

Effective Tax Rate

Our effective tax rate for the three months ended March 31, 2021 was an expense of 20.3% as compared to a benefit of 8.9% for the three months ended March 31, 2020. The increase in the effective tax rate quarter over quarter is primarily attributable to recognizing a lower income tax benefit related to excess tax benefits from stock option exercises in the first quarter of 2021.  For the three months ended March 31, 2021 and March 31, 2020 we recognized $17.4 million and $55.7 million, respectively, in such income tax benefits.

Other Matters - COVID-19

The COVID-19 pandemic has had a significant impact on all facets of our business.  Our primary focus as we face this challenge is to do everything we can to ensure the safety and well-being of our employees, customers and trade partners.  Residential construction has been deemed an essential business in each of the markets we operate.  In each of our markets, we continue to operate in accordance with the guidelines issued by the Centers for Disease Control and Prevention as well as state and local health department guidelines, which has resulted in significant changes to the way we conduct business. 

Although current demand for new homes is strong, there remains uncertainty regarding the extent and timing of disruption to our business that may result from COVID-19 and related governmental actions.  There is also uncertainty as to the effects of economic relief efforts on the U.S. economy, unemployment, consumer confidence, demand for our homes and the mortgage market, including lending standards and secondary mortgage markets. We are unable to predict the extent to which this will impact our operational and financial performance including the impact of future developments such as the duration and spread of COVID-19, corresponding governmental actions, and the impact of such on our employees, customers and trade partners.

About NVR

NVR, Inc. operates in two business segments:  homebuilding and mortgage banking.  The homebuilding segment sells and builds homes under the Ryan Homes, NVHomes and Heartland Homes trade names, and operates in thirty-three metropolitan areas in fourteen states and Washington, D.C.  For more information about NVR, Inc. and its brands, see www.nvrinc.com, www.ryanhomes.com, www.nvhomes.com and www.heartlandluxuryhomes.com.

Some of the statements in this release made by the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should" or "anticipates" or the negative thereof or other comparable terminology.  All statements other than of historical facts are forward-looking statements.  Forward-looking statements contained in this document may include those regarding market trends, NVR's financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements.  Such risk factors include, but are not limited to the following: the impact of COVID-19 on the economy; general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR's customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control.  NVR undertakes no obligation to update such forward-looking statements except as required by law.

 

NVR, Inc. Consolidated Statements of Income (in thousands, except per share data) (unaudited)
		Three Months Ended March 31,
		2021				2020
Homebuilding:
Revenues		$	1,963,711			$	1,555,707
Other income		1,586				5,336
Cost of sales		(1,577,453)				(1,294,743)
Selling, general and administrative		(121,419)				(110,167)
Operating income		266,425				156,133
Interest expense		(13,006)				(6,214)
Homebuilding income		253,419				149,919
Mortgage Banking:
Mortgage banking fees		77,735				26,821
Interest income		2,032				2,469
Other income		867				649
General and administrative		(21,656)				(18,211)
Interest expense		(391)				(272)
Mortgage banking income		58,587				11,456
Income before taxes		312,006				161,375
Income tax (expense) benefit		(63,244)				14,328
Net income		$	248,762			$	175,703
Basic earnings per share		$	67.72			$	47.97
Diluted earnings per share		$	63.21			$	44.96
Basic weighted average shares outstanding		3,673				3,663
Diluted weighted average shares outstanding		3,935				3,908

 

NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
		March 31, 2021				December 31, 2020
ASSETS
Homebuilding:
Cash and cash equivalents		$	2,753,123			$	2,714,720
Restricted cash		36,193				28,912
Receivables		22,059				18,299
Inventory:
Lots and housing units, covered under sales agreements with customers		1,623,941				1,484,936
Unsold lots and housing units		116,141				123,197
Land under development		63,153				62,790
Building materials and other		26,557				38,159
		1,829,792				1,709,082
Contract land deposits, net		396,903				387,628
Property, plant and equipment, net		55,720				57,786
Operating lease right-of-use assets		50,770				53,110
Reorganization value in excess of amounts allocable to identifiable assets, net		41,580				41,580
Other assets		219,479				203,399
		5,405,619				5,214,516
Mortgage Banking:
Cash and cash equivalents		21,061				63,547
Restricted cash		3,867				2,334
Mortgage loans held for sale, net		334,782				449,760
Property and equipment, net		4,460				4,544
Operating lease right-of-use assets		12,087				12,439
Reorganization value in excess of amounts allocable to identifiable assets, net		7,347				7,347
Other assets		31,585				22,654
		415,189				562,625
Total assets		$	5,820,808			$	5,777,141

 

NVR, Inc.
Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
(unaudited)
		March 31, 2021				December 31, 2020
LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:
Accounts payable		$	360,881			$	339,867
Accrued expenses and other liabilities		458,849				440,671
Customer deposits		314,453				240,758
Operating lease liabilities		56,697				59,357
Senior notes		1,517,114				1,517,395
		2,707,994				2,598,048
Mortgage Banking:
Accounts payable and other liabilities		53,335				62,720
Operating lease liabilities		12,972				13,299
		66,307				76,019
Total liabilities		2,774,301				2,674,067
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both March 31, 2021 and December 31, 2020		206				206
Additional paid-in capital		2,272,006				2,214,426
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both March 31, 2021 and December 31, 2020		(16,710)				(16,710)
Deferred compensation liability		16,710				16,710
Retained earnings		9,059,882				8,811,120
Less treasury stock at cost – 16,915,721 and 16,859,753 shares as of March 31, 2021 and December 31, 2020, respectively		(8,285,587)				(7,922,678)
Total shareholders' equity		3,046,507				3,103,074
Total liabilities and shareholders' equity		$	5,820,808			$	5,777,141

 

NVR, Inc.
Operating Activity
(dollars in thousands)
(unaudited)
		Three Months Ended March 31,
		2021						2020
		Units		Average Price				Units		Average Price
New orders, net of cancellations:
Mid Atlantic (1)		2,291		$	502.2			2,061		$	442.2
North East (2)		440		$	474.7			358		$	382.2
Mid East (3)		1,795		$	350.4			1,225		$	326.2
South East (4)		1,788		$	337.6			1,371		$	305.6
Total		6,314		$	410.5			5,015		$	372.3
		Three Months Ended March 31,
		2021						2020
		Units		Average Price				Units		Average Price
Settlements:
Mid Atlantic (1)		2,010		$	465.7			1,795		$	431.2
North East (2)		372		$	436.0			281		$	377.7
Mid East (3)		1,263		$	336.4			985		$	325.6
South East (4)		1,427		$	308.6			1,169		$	303.5
Total		5,072		$	387.2			4,230		$	367.8
		As of March 31,
		2021						2020
		Units		Average Price				Units		Average Price
Backlog:
Mid Atlantic (1)		4,760		$	488.2			3,878		$	445.3
North East (2)		1,018		$	463.7			664		$	407.6
Mid East (3)		3,406		$	350.6			2,053		$	331.5
South East (4)		3,607		$	336.6			2,423		$	314.9
Total		12,791		$	406.9			9,018		$	381.6

 

NVR, Inc.
Operating Activity (Continued)
(dollars in thousands)
(unaudited)
		Three Months Ended March 31,
		2021			2020
Average active communities:
Mid Atlantic (1)		159			189
North East (2)		35			40
Mid East (3)		140			138
South East (4)		111			108
Total		445			475
		Three Months Ended March 31,
		2021			2020
Homebuilding data:
New order cancellation rate		10%			21%
Lots controlled at end of period		108,700			103,600
Mortgage banking data:
Loan closings		$	1,412,879		$	1,132,104
Capture rate		89%			91%
Common stock information:
Shares outstanding at end of period		3,639,609			3,673,694
Number of shares repurchased		86,523			57,611
Aggregate cost of shares repurchased		$	377,425		$	216,582

(1)	Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
(2)	New Jersey and Eastern Pennsylvania
(3)	New York, Ohio, Western Pennsylvania, Indiana and Illinois
(4)	North Carolina, South Carolina, Tennessee and Florida

 

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SOURCE NVR, Inc.

FAQ

What were NVR's Q1 2021 earnings results?

NVR reported Q1 2021 net income of $248.8 million, or $63.21 per diluted share, a 42% increase from Q1 2020.

How did NVR's revenues perform in Q1 2021?

NVR's consolidated revenues for Q1 2021 totaled $2.04 billion, up 29% from $1.58 billion in Q1 2020.

What was the status of new orders for NVR in Q1 2021?

New orders for NVR rose by 26% in Q1 2021, totaling 6,314 units.

How did NVR's mortgage banking segment perform in Q1 2021?

The mortgage banking segment's income before tax surged 411% to $58.6 million in Q1 2021.

What impact did COVID-19 have on NVR's business?

NVR highlighted uncertainties due to COVID-19 that could affect operational and financial performance.