NVR, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS
- None.
- Decrease in net income and diluted earnings per share for the fourth quarter and the year ended December 31, 2023 compared to the same periods in 2022
- Consolidated revenues decreased by 10% for the fourth quarter and the year ended December 31, 2023
- Decrease in homebuilding revenues and gross profit margin for the fourth quarter and the year ended December 31, 2023
- Decrease in new orders and settlements for the year ended December 31, 2023
- Decrease in mortgage closed loan production for the year ended December 31, 2023
Insights
The reported decrease in net income and diluted earnings per share (EPS) for NVR, Inc. is a critical metric for investors, as it reflects the company's profitability. The 10% decline in net income and 9% decrease in EPS year-over-year for the fourth quarter indicate potential pressures on the company's margins or operational efficiency. The consolidated revenue also saw a 10% decrease, which aligns with the net income trend and suggests a challenging market environment or possible declines in demand.
Moreover, the 10% decrease in annual consolidated revenues and the 8% decrease in net income year-over-year highlight the potential for a sustained downturn in the company's financial performance. This could be due to macroeconomic factors affecting the homebuilding sector, such as interest rate hikes, which typically lead to reduced mortgage lending and home purchases. The gross profit margin contraction from 25.8% to 24.3% year-over-year further substantiates the possibility of increased costs or pricing pressures.
The increase in new orders by 25% in the fourth quarter, despite a decrease in the average sales price of new orders, indicates a robust demand for NVR's homes. This could be due to a variety of factors, such as strategic pricing, market positioning, or a shift in consumer preferences toward the company's product offerings. The reduction in the cancellation rate from 18% to 13% also suggests improved customer confidence or adjustments in sales strategies. However, a decrease in settlements by 7% could imply delivery challenges or a lag in the construction cycle.
The increase in the backlog on both a unit and dollar basis by 12% and 10%, respectively, provides a positive outlook for future revenue, assuming these orders translate into completed sales. It's important to monitor whether the backlog conversion rate aligns with historical performance to better understand the company's efficiency in turning orders into revenue.
The significant decrease in the effective tax rate from 23.4% to 17.5% annually can have a considerable impact on net income. The lower tax expense, primarily due to a higher income tax benefit from stock option exercises, acts as a buffer against the reported decline in profitability. It's essential to consider the sustainability of such tax benefits as they can fluctuate based on stock market performance and employee stock option exercise patterns. Investors should be aware that such tax benefits may not be a recurring factor in the company's financial health and could distort the net income figure relative to operational performance.
For the year ended December 31, 2023, consolidated revenues were
Homebuilding
New orders in the fourth quarter of 2023 increased by
Homebuilding revenues of
New orders for the year ended December 31, 2023 increased by
Mortgage Banking
Mortgage closed loan production in the fourth quarter of 2023 totaled
Mortgage closed loan production for the year ended December 31, 2023 decreased
Effective Tax Rate
Our effective tax rate for the three and twelve months ended December 31, 2023 was
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-six metropolitan areas in fifteen states and
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 and financial results, 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: 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; the economic impact of a major epidemic or pandemic; 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) | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
(unaudited) | (unaudited) | (unaudited) | ||||||
Homebuilding: | ||||||||
Revenues | $ 2,387,094 | $ 2,668,036 | $ 9,314,605 | $ 10,326,770 | ||||
Other income | 40,891 | 21,592 | 148,010 | 37,038 | ||||
Cost of sales | (1,812,968) | (1,993,722) | (7,051,198) | (7,662,271) | ||||
Selling, general and administrative | (154,086) | (140,995) | (588,962) | (532,353) | ||||
Operating income | 460,931 | 554,911 | 1,822,455 | 2,169,184 | ||||
Interest expense | (6,618) | (6,630) | (26,875) | (38,140) | ||||
Homebuilding income | 454,313 | 548,281 | 1,795,580 | 2,131,044 | ||||
Mortgage Banking: | ||||||||
Mortgage banking fees | 45,476 | 44,146 | 203,597 | 199,664 | ||||
Interest income | 4,779 | 3,570 | 16,687 | 11,853 | ||||
Other income | 1,189 | 1,294 | 4,449 | 4,963 | ||||
General and administrative | (21,537) | (22,300) | (91,075) | (92,946) | ||||
Interest expense | (173) | (269) | (865) | (1,384) | ||||
Mortgage banking income | 29,734 | 26,441 | 132,793 | 122,150 | ||||
Income before taxes | 484,047 | 574,722 | 1,928,373 | 2,253,194 | ||||
Income tax expense | (73,972) | (119,954) | (336,762) | (527,619) | ||||
Net income | $ 410,075 | $ 454,768 | $ 1,591,611 | $ 1,725,575 | ||||
Basic earnings per share | $ 128.46 | $ 141.82 | $ 491.52 | $ 525.20 | ||||
Diluted earnings per share | $ 121.56 | $ 133.44 | $ 463.31 | $ 491.82 | ||||
Basic weighted average shares outstanding | 3,192 | 3,207 | 3,238 | 3,286 | ||||
Diluted weighted average shares outstanding | 3,373 | 3,408 | 3,435 | 3,509 | ||||
NVR, Inc. | ||||
Consolidated Balance Sheets | ||||
(in thousands, except share and per share data) | ||||
December 31, 2023 | December 31, 2022 | |||
(unaudited) | ||||
ASSETS | ||||
Homebuilding: | ||||
Cash and cash equivalents | $ 3,126,472 | $ 2,503,424 | ||
Restricted cash | 41,483 | 48,455 | ||
Receivables | 29,000 | 20,842 | ||
Inventory: | ||||
Lots and housing units, covered under sales agreements with customers | 1,674,686 | 1,554,955 | ||
Unsold lots and housing units | 214,666 | 181,952 | ||
Land under development | 36,895 | 27,100 | ||
Building materials and other | 23,903 | 24,268 | ||
1,950,150 | 1,788,275 | |||
Contract land deposits, net | 576,551 | 496,080 | ||
Property, plant and equipment, net | 63,716 | 57,950 | ||
Operating lease right-of-use assets | 70,384 | 71,081 | ||
Reorganization value in excess of amounts allocable to identifiable assets, net | 41,580 | 41,580 | ||
Deferred tax assets, net | 148,005 | 143,585 | ||
Other assets | 94,746 | 75,898 | ||
6,142,087 | 5,247,170 | |||
Mortgage Banking: | ||||
Cash and cash equivalents | 36,422 | 19,415 | ||
Restricted cash | 11,067 | 2,974 | ||
Mortgage loans held for sale, net | 222,560 | 316,806 | ||
Property and equipment, net | 6,348 | 3,559 | ||
Operating lease right-of-use assets | 23,541 | 16,011 | ||
Reorganization value in excess of amounts allocable to identifiable assets, net | 7,347 | 7,347 | ||
Other assets | 152,385 | 47,691 | ||
459,670 | 413,803 | |||
Total assets | $ 6,601,757 | $ 5,660,973 | ||
NVR, Inc. | ||||
Consolidated Balance Sheets (Continued) | ||||
(in thousands, except share and per share data) | ||||
December 31, 2023 | December 31, 2022 | |||
(unaudited) | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Homebuilding: | ||||
Accounts payable | $ 347,738 | $ 334,016 | ||
Accrued expenses and other liabilities | 413,043 | 437,234 | ||
Customer deposits | 334,441 | 313,804 | ||
Operating lease liabilities | 75,797 | 75,818 | ||
Senior notes | 913,027 | 914,888 | ||
2,084,046 | 2,075,760 | |||
Mortgage Banking: | ||||
Accounts payable and other liabilities | 127,511 | 61,396 | ||
Operating lease liabilities | 25,475 | 16,968 | ||
152,986 | 78,364 | |||
Total liabilities | 2,237,032 | 2,154,124 | ||
Commitments and contingencies | ||||
Shareholders' equity: | ||||
Common stock, | 206 | 206 | ||
Additional paid-in capital | 2,848,528 | 2,600,014 | ||
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of | (16,710) | (16,710) | ||
Deferred compensation liability | 16,710 | 16,710 | ||
Retained earnings | 13,365,025 | 11,773,414 | ||
Less treasury stock at cost – 17,360,454 and 17,336,397 shares as of December | (11,849,034) | (10,866,785) | ||
Total shareholders' equity | 4,364,725 | 3,506,849 | ||
Total liabilities and shareholders' equity | $ 6,601,757 | $ 5,660,973 | ||
NVR, Inc. | ||||||||||||||||
Operating Activity | ||||||||||||||||
(dollars in thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Units | Average | Units | Average | Units | Average | Units | Average | |||||||||
New orders, net of cancellations: | ||||||||||||||||
Mid Atlantic (1) | 2,029 | $ 500.9 | 1,836 | $ 525.0 | 8,434 | $ 515.5 | 7,816 | $ 526.6 | ||||||||
North East (2) | 526 | $ 597.7 | 430 | $ 573.6 | 1,879 | $ 573.2 | 1,679 | $ 528.3 | ||||||||
Mid East (3) | 942 | $ 412.2 | 741 | $ 381.8 | 4,514 | $ 396.5 | 4,344 | $ 400.5 | ||||||||
South East (4) | 1,693 | $ 366.9 | 1,146 | $ 360.3 | 6,902 | $ 366.4 | 5,325 | $ 399.4 | ||||||||
Total | 5,190 | $ 450.9 | 4,153 | $ 459.0 | 21,729 | $ 448.4 | 19,164 | $ 462.8 | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Units | Average | Units | Average | Units | Average | Units | Average | |||||||||
Settlements: | ||||||||||||||||
Mid Atlantic (1) | 2,008 | $ 519.5 | 2,153 | $ 526.6 | 8,032 | $ 521.5 | 9,042 | $ 527.1 | ||||||||
North East (2) | 465 | $ 567.1 | 456 | $ 503.4 | 1,736 | $ 546.2 | 1,763 | $ 506.3 | ||||||||
Mid East (3) | 1,126 | $ 391.3 | 1,484 | $ 400.5 | 4,391 | $ 392.4 | 5,518 | $ 389.1 | ||||||||
South East (4) | 1,733 | $ 368.9 | 1,656 | $ 428.7 | 6,503 | $ 377.2 | 6,409 | $ 393.3 | ||||||||
Total | 5,332 | $ 447.6 | 5,749 | $ 464.0 | 20,662 | $ 450.7 | 22,732 | $ 454.3 | ||||||||
As of December 31, | |||||||||
2023 | 2022 | ||||||||
Units | Average | Units | Average | ||||||
Backlog: | |||||||||
Mid Atlantic (1) | 4,094 | $ 522.5 | 3,692 | $ 536.3 | |||||
North East (2) | 1,028 | $ 602.0 | 885 | $ 553.9 | |||||
Mid East (3) | 1,976 | $ 412.1 | 1,853 | $ 403.2 | |||||
South East (4) | 3,131 | $ 378.4 | 2,732 | $ 405.7 | |||||
Total | 10,229 | $ 465.0 | 9,162 | $ 472.2 | |||||
NVR, Inc. | ||||||||
Operating Activity (Continued) | ||||||||
(dollars in thousands) | ||||||||
(unaudited) | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Average active communities: | ||||||||
Mid Atlantic (1) | 167 | 169 | 166 | 160 | ||||
North East (2) | 36 | 37 | 36 | 36 | ||||
Mid East (3) | 105 | 127 | 110 | 126 | ||||
South East (4) | 130 | 95 | 115 | 93 | ||||
Total | 438 | 428 | 427 | 415 | ||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Homebuilding data: | ||||||||
New order cancellation rate | 13.0 % | 18.4 % | 12.8 % | 14.2 % | ||||
Lots controlled at end of period | 141,500 | 131,900 | ||||||
Mortgage banking data: | ||||||||
Loan closings | $ 1,496,003 | $ 1,524,665 | $ 5,736,532 | $ 6,313,416 | ||||
Capture rate | 88 % | 80 % | 87 % | 83 % | ||||
Common stock information: | ||||||||
Shares outstanding at end of period | 3,194,876 | 3,218,933 | ||||||
Number of shares repurchased | 46,748 | 28,504 | 181,499 | 323,652 | ||||
Aggregate cost of shares repurchased | $ 286,428 | $ 116,165 | $ 1,081,815 | $ 1,500,358 | ||||
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(3) | New |
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SOURCE NVR, INC.
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