PR Newswire | Oct 20, 2020 09:01AM EDT

10/20 08:00 CDT

NVR, Inc. Announces Third Quarter Results RESTON, Va., Oct. 20, 2020

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 (105,741) (109,969) (318,610) (337,913) administrative

Operating 280,954 251,782 641,058 671,868 income

Interest (11,309) (6,008) (26,689) (18,034) expense

Homebuilding 269,645 245,774 614,369 653,834 income



Mortgage Banking:

Mortgage 69,261 37,933 127,692 124,484 banking fees

Interest 2,222 3,340 6,545 8,910 income

Other income 887 819 2,215 2,039

General and (20,180) (20,407) (57,149) (57,999) administrative

Interest (378) (285) (1,009) (775) expense

Mortgage 51,812 21,400 78,294 76,659 banking income



Income before 321,457 267,174 692,663 730,493 taxes

Income tax (64,991) (43,387) (96,419) (108,091) expense



Net income $256,466 $223,787 $596,244 $622,402



Basic earnings$69.19 $60.94 $161.85 $171.43 per share



Diluted earnings per $65.11 $56.11 $153.03 $156.61 share



Basic weighted average shares3,706 3,672 3,684 3,631 outstanding



Diluted weighted 3,939 3,988 3,896 3,974 average shares outstanding

NVR, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)



September 30, 2020December 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 1,541,587 1,075,420 sales agreements with customers

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 41,580 41,580 assets, net

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 7,347 7,347 assets, net

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, 2020December 31, 2019

LIABILITIES AND SHAREHOLDERS' EQUITY

Homebuilding:

Accounts payable $342,412 $262,987

Accrued expenses and other liabilities387,757 346,035

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 liabilities45,906 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 206 206 September 30, 2020 and December 31, 2019

Additional paid-in capital 2,188,207 2,055,407

Deferred compensation trust - 106,697 and 107,295 shares of NVR, Inc. common(16,710) (16,912) stock as of September 30, 2020 and December 31, 2019, respectively

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(7,775,536) (7,624,241) September 30, 2020 and December 31, 2019, respectively

Total shareholders' equity 2,918,993 2,341,244

Total liabilities and shareholders' $5,499,920 $3,809,815 equity



NVR, Inc.

Operating Activity

(dollars in thousands)

(unaudited)



Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Units Average UnitsAverage Units Average Units Average Price Price Price Price

New orders, net of cancellations:

Mid Atlantic (1)2,592 $455.52,086$427.77,034 $447.46,852 $419.1

North East (2) 542 $441.1323 $379.01,269 $405.41,000 $378.9

Mid East (3) 1,644 $335.51,141$328.64,405 $326.03,631 $322.0

South East (4) 1,903 $313.01,216$304.24,889 $305.33,661 $301.6

Total 6,681 $384.24,766$369.217,597$374.515,144$364.8





Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Units Average UnitsAverage Units Average Units Average Price Price Price Price

Settlements:

Mid Atlantic (1)2,172 $437.12,421$418.05,898 $434.66,890 $417.3

North East (2) 396 $398.9316 $381.3939 $385.9933 $391.0

Mid East (3) 1,250 $324.01,255$323.53,180 $322.53,382 $326.5

South East (4) 1,362 $299.81,132$295.63,689 $301.93,132 $296.6

Total 5,180 $370.85,124$365.513,706$369.514,337$367.8





As of September 30,

2020 2019

Units Average UnitsAverage Price Price

Backlog:

Mid Atlantic (1)4,748 $457.74,110$426.4

North East (2) 917 $427.8630 $383.3

Mid East (3) 3,038 $333.22,055$327.0

South East (4) 3,421 $315.12,377$310.0

Total 12,124$384.09,172$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.