NVR, Inc. Announces Third Quarter Results

Rhea-AI Summary

NVR, Inc. reported net income of $256.5 million for Q3 2020, up 15% from 2019, translating to $65.11 per diluted share. Consolidated revenues rose by 4% to $1.99 billion. New orders surged 40% to 6,681 units, driven by strong demand due to low mortgage rates. However, for the nine months ended September 30, 2020, revenues fell 4% to $5.19 billion, with net income also declining 4%. The backlog of homes sold but not settled increased by 32%.

Positive

• Net income for Q3 2020 increased by 15% to $256.5 million.
• Diluted EPS for Q3 2020 rose by 16% to $65.11.
• New orders in Q3 2020 increased by 40% to 6,681 units.
• Average sales price of new orders grew by 4% to $384,200.
• Cancellation rate reduced from 16% to 12% year-over-year.
• Backlog of homes sold but not settled increased by 32% to 12,124 units.

Negative

• Consolidated revenues for nine months fell by 4% to $5.19 billion.
• Net income for nine months decreased by 4% to $596.2 million.
• Diluted EPS for nine months declined by 2% to $153.03.

RESTON, Va., Oct. 20, 2020 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its third quarter ended September 30, 2020 of $256,466,000, or $65.11 per diluted share.  Net income and diluted earnings per share for the third quarter ended September 30, 2020 increased 15% and 16%, respectively, when compared to 2019 third quarter net income of $223,787,000, or $56.11 per diluted share.  Consolidated revenues for the third quarter of 2020 totaled $1,990,012,000, which increased 4% from $1,911,264,000 in the third quarter of 2019.

For the nine months ended September 30, 2020, consolidated revenues were $5,192,908,000, a 4% decrease from $5,398,469,000 reported for 2019.  Net income for the nine months ended September 30, 2020 was $596,244,000, a decrease of 4% when compared to the nine months ended September 30, 2019.  Diluted earnings per share for the nine months ended September 30, 2020 was $153.03, a decrease of 2% from $156.61 per diluted share for 2019.

Homebuilding

New orders in the third quarter of 2020 increased by 40% to 6,681 units, when compared to 4,766 units in the third quarter of 2019. New orders have been favorably impacted by robust demand attributable to historically low mortgage interest rates and lower resale inventory levels.  The average sales price of new orders in the third quarter of 2020 was $384,200, an increase of 4% when compared with the third quarter of 2019.  The cancellation rate in the third quarter of 2020 decreased to 12% compared to 16% in the third quarter of 2019.  Settlements increased in the third quarter of 2020 to 5,180 units, which was 1% higher than the third quarter of 2019.  Our backlog of homes sold but not settled as of September 30, 2020 increased on both a unit and dollar basis by 32% and 37%, respectively, to 12,124 units and $4,655,510,000 compared to the respective backlog unit and dollar balances as of September 30, 2019.

Homebuilding revenues of $1,920,751,000 in the third quarter of 2020 increased 3% compared to homebuilding revenues of $1,873,331,000 in the third quarter of 2019.  Gross profit margin in the third quarter of 2020 increased to 20.0%, compared to 19.0% in the third quarter of 2019.  Income before tax from the homebuilding segment totaled $269,645,000 in the third quarter of 2020, an increase of 10% when compared to the third quarter of 2019.

Mortgage Banking

Mortgage closed loan production in the third quarter of 2020 totaled $1,382,060,000, an increase of 1% when compared to the third quarter of 2019.  Income before tax from the mortgage banking segment totaled $51,812,000 in the third quarter of 2020, an increase of 142% when compared to $21,400,000 in the third quarter of 2019.  This increase is due primarily to an increase in secondary marketing gains on sales of loans.

Effective Tax Rate

Our effective tax rate for the three and nine months ended September 30, 2020 was 20.2% and 13.9%, respectively, compared to 16.2% and 14.8% for the three and nine months ended September 30, 2019, respectively. The effective tax rate in each period was favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $17,834,000 and $80,343,000 for the three and nine months ended September 30, 2020, respectively, and $27,604,000 and $86,809,000, for the three and nine months ended September 30, 2019, respectively.

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. We are currently able to operate in all of the markets we serve. In each of our markets, we continue to operate in accordance with the safety guidelines issued by the Centers for Disease Control and Prevention as well as state and local guidelines.

There is 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-two 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 September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Homebuilding:
Revenues		$	1,920,751			$	1,873,331			$	5,065,216			$	5,273,985
Other income		1,988				6,696				9,732				18,266
Cost of sales		(1,536,044)				(1,518,276)				(4,115,280)				(4,282,470)
Selling, general and administrative		(105,741)				(109,969)				(318,610)				(337,913)
Operating income		280,954				251,782				641,058				671,868
Interest expense		(11,309)				(6,008)				(26,689)				(18,034)
Homebuilding income		269,645				245,774				614,369				653,834
Mortgage Banking:
Mortgage banking fees		69,261				37,933				127,692				124,484
Interest income		2,222				3,340				6,545				8,910
Other income		887				819				2,215				2,039
General and administrative		(20,180)				(20,407)				(57,149)				(57,999)
Interest expense		(378)				(285)				(1,009)				(775)
Mortgage banking income		51,812				21,400				78,294				76,659
Income before taxes		321,457				267,174				692,663				730,493
Income tax expense		(64,991)				(43,387)				(96,419)				(108,091)
Net income		$	256,466			$	223,787			$	596,244			$	622,402
Basic earnings per share		$	69.19			$	60.94			$	161.85			$	171.43
Diluted earnings per share		$	65.11			$	56.11			$	153.03			$	156.61
Basic weighted average shares outstanding		3,706				3,672				3,684				3,631
Diluted weighted average shares outstanding		3,939				3,988				3,896				3,974

 

NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
		September 30, 2020				December 31, 2019
ASSETS
Homebuilding:
Cash and cash equivalents		$	2,539,460			$	1,110,892
Restricted cash		28,026				17,943
Receivables		21,461				18,278
Inventory:
Lots and housing units, covered under sales agreements with customers		1,541,587				1,075,420
Unsold lots and housing units		124,371				184,352
Land under development		63,608				69,196
Building materials and other		33,620				18,320
		1,763,186				1,347,288
Contract land deposits, net		377,105				413,851
Property, plant and equipment, net		58,570				52,260
Operating lease right-of-use assets		54,964				63,825
Reorganization value in excess of amounts allocable to identifiable assets, net		41,580				41,580
Other assets		204,343				176,144
		5,088,695				3,242,061
Mortgage Banking:
Cash and cash equivalents		21,546				29,412
Restricted cash		3,172				2,276
Mortgage loans held for sale, net		340,927				492,125
Property and equipment, net		4,896				5,828
Operating lease right-of-use assets		13,376				13,345
Reorganization value in excess of amounts allocable to identifiable assets, net		7,347				7,347
Other assets		19,961				17,421
		411,225				567,754
Total assets		$	5,499,920			$	3,809,815

 

NVR, Inc.
Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
(unaudited)
		September 30, 2020				December 31, 2019
LIABILITIES AND SHAREHOLDERS' EQUITY
Homebuilding:
Accounts payable		$	342,412			$	262,987
Accrued expenses and other liabilities		387,757				346,035
Customer deposits		211,122				131,886
Operating lease liabilities		61,382				71,095
Senior notes		1,517,982				598,301
		2,520,655				1,410,304
Mortgage Banking:
Accounts payable and other liabilities		45,906				43,985
Operating lease liabilities		14,366				14,282
		60,272				58,267
Total liabilities		2,580,927				1,468,571
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 20,555,330 shares issued as of both September 30, 2020 and December 31, 2019		206				206
Additional paid-in capital		2,188,207				2,055,407
Deferred compensation trust – 106,697 and 107,295 shares of NVR, Inc. common stock as of September 30, 2020 and December 31, 2019, respectively		(16,710)				(16,912)
Deferred compensation liability		16,710				16,912
Retained earnings		8,506,116				7,909,872
Less treasury stock at cost – 16,836,943 and 16,922,558 shares as of September 30, 2020 and December 31, 2019, respectively		(7,775,536)				(7,624,241)
Total shareholders' equity		2,918,993				2,341,244
Total liabilities and shareholders' equity		$	5,499,920			$	3,809,815

 

NVR, Inc.
Operating Activity
(dollars in thousands)
(unaudited)
		Three Months Ended September 30,												Nine Months Ended September 30,
		2020						2019						2020							2019
		Units		Average Price				Units		Average Price				Units			Average Price				Units			Average Price
New orders, net of cancellations:
Mid Atlantic (1)		2,592		$	455.5			2,086		$	427.7			7,034			$	447.4			6,852			$	419.1
North East (2)		542		$	441.1			323		$	379.0			1,269			$	405.4			1,000			$	378.9
Mid East (3)		1,644		$	335.5			1,141		$	328.6			4,405			$	326.0			3,631			$	322.0
South East (4)		1,903		$	313.0			1,216		$	304.2			4,889			$	305.3			3,661			$	301.6
Total		6,681		$	384.2			4,766		$	369.2			17,597			$	374.5			15,144			$	364.8
		Three Months Ended September 30,												Nine Months Ended September 30,
		2020						2019						2020							2019
		Units		Average Price				Units		Average Price				Units			Average Price				Units			Average Price
Settlements:
Mid Atlantic (1)		2,172		$	437.1			2,421		$	418.0			5,898			$	434.6			6,890			$	417.3
North East (2)		396		$	398.9			316		$	381.3			939			$	385.9			933			$	391.0
Mid East (3)		1,250		$	324.0			1,255		$	323.5			3,180			$	322.5			3,382			$	326.5
South East (4)		1,362		$	299.8			1,132		$	295.6			3,689			$	301.9			3,132			$	296.6
Total		5,180		$	370.8			5,124		$	365.5			13,706			$	369.5			14,337			$	367.8
		As of September 30,
		2020						2019
		Units		Average Price				Units		Average Price
Backlog:
Mid Atlantic (1)		4,748		$	457.7			4,110		$	426.4
North East (2)		917		$	427.8			630		$	383.3
Mid East (3)		3,038		$	333.2			2,055		$	327.0
South East (4)		3,421		$	315.1			2,377		$	310.0
Total		12,124		$	384.0			9,172		$	371.0

 

NVR, Inc.
Operating Activity (Continued)
(dollars in thousands)
(unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Average active communities:
Mid Atlantic (1)		170				201				183				208
North East (2)		41				34				41				32
Mid East (3)		135				136				138				131
South East (4)		119				102				113				93
Total		465				473				475				464
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Homebuilding data:
New order cancellation rate		11.8		%		15.7		%		15.8		%		14.3		%
Lots controlled at end of period										103,200				102,000
Mortgage banking data:
Loan closings		$	1,382,060			$	1,373,946			$	3,658,591			$	3,745,983
Capture rate		89		%		90		%		90		%		89		%
Common stock information:
Shares outstanding at end of period										3,718,387				3,698,185
Number of shares repurchased		—				18,024				57,611				129,679
Aggregate cost of shares repurchased		$	—			$	61,064			$	216,582			$	365,542

(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 net income and diluted earnings per share for Q3 2020?

NVR reported net income of $256.5 million with diluted earnings per share of $65.11 for Q3 2020.

How much did NVR's new orders increase in Q3 2020?

New orders increased by 40% to 6,681 units in Q3 2020 compared to the same quarter in 2019.

What is the average sales price of new orders for NVR in Q3 2020?

The average sales price of new orders in Q3 2020 was $384,200, a 4% increase compared to Q3 2019.

How did NVR's consolidated revenues perform for the nine months ended September 30, 2020?

Consolidated revenues for the nine months ended September 30, 2020 decreased by 4% to $5.19 billion.

What was the cancellation rate for NVR in Q3 2020?

The cancellation rate for NVR in Q3 2020 was 12%, down from 16% in Q3 2019.