NVR, Inc. Announces Second Quarter Results

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Jul 21, 2021, 09:00 ET

RESTON, Va., July 21, 2021 /PRNewswire/ -- NVR, Inc. (NYSE: NVR), one of the nation's largest homebuilding and mortgage banking companies, announced net income for its second quarter ended June 30, 2021 of $321.3 million, or $82.45 per diluted share. Net income and diluted earnings per share for the second quarter ended June 30, 2021 increased 96% and 94%, respectively, when compared to 2020 second quarter net income of $164.1 million, or $42.50 per diluted share. Consolidated revenues for the second quarter of 2021 totaled $2.28 billion, an increase of 41% from $1.62 billion in the second quarter of 2020.

For the six months ended June 30, 2021, consolidated revenues were $4.33 billion, a 35% increase from $3.20 billion reported in 2020. Net income for the six months ended June 30, 2021 was $570.1 million, an increase of 68% when compared to the six months ended June 30, 2020. Diluted earnings per share for the six months ended June 30, 2021 was $145.53, an increase of 66% from $87.56 per diluted share for 2020.

Homebuilding

New orders in the second quarter of 2021 decreased by 6% to 5,521 units, when compared to 5,901 units in the second quarter of 2020. The average sales price of new orders in the second quarter of 2021 was $440,200, an increase of 20% when compared with the second quarter of 2020. The cancellation rate in the second quarter of 2021 was 8% compared to 16% in the second quarter of 2020. Settlements in the second quarter of 2021 increased by 32% to 5,685 units, compared to 4,296 units in the second quarter of 2020. Our backlog of homes sold but not settled as of June 30, 2021 increased on a unit basis by 19% to 12,627 units and increased on a dollar basis by 35% to $5.41 billion when compared to the respective backlog unit and dollar balances as of June 30, 2020.

Homebuilding revenues of $2.22 billion in the second quarter of 2021 increased by 40% compared to homebuilding revenues of $1.59 billion in the second quarter of 2020. Gross profit margin in the second quarter of 2021 increased to 22.6%, compared to 19.2% in the second quarter of 2020. Income before tax from the homebuilding segment totaled $378.3 million in the second quarter of 2021, an increase of 94% when compared to the second quarter of 2020.

Mortgage Banking

Mortgage closed loan production in the second quarter of 2021 totaled $1.57 billion, an increase of 37% when compared to the second quarter of 2020. Income before tax from the mortgage banking segment totaled $39.2 million in the second quarter of 2021, an increase of 161% when compared to $15.0 million in the second quarter of 2020. This increase was primarily attributable to increased mortgage volume in the second quarter of 2021, coupled with income in the second 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 and six months ended June 30, 2021 was 23.0% and 21.9%, respectively, compared to 21.8% and 8.5% for the three and six months ended June 30, 2020, respectively. The effective tax rates in each period were favorably impacted by the recognition of an income tax benefit related to excess tax benefits from stock option exercises totaling $11.2 million and $28.6 million for the three and six months ended June 30, 2021, respectively, and $6.9 million and $62.5 million for the three and six months ended June 30, 2020, 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. 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

*Homebuilding:*
Revenues	$	2,224,560	$	1,588,758	$	4,188,271	$	3,144,465
Other income	1,632		2,408		3,218		7,744
Cost of sales	(1,721,673)		(1,284,493)		(3,299,126)		(2,579,236)
Selling, general and administrative	(113,406)		(102,702)		(234,825)		(212,869)
Operating income	391,113		203,971		657,538		360,104
Interest expense	(12,850)		(9,166)		(25,856)		(15,380)
Homebuilding income	378,263		194,805		631,682		344,724

*Mortgage Banking:*
Mortgage banking fees	59,038		31,610		136,773		58,431
Interest income	2,209		1,854		4,241		4,323
Other income	988		679		1,855		1,328
General and administrative	(22,613)		(18,758)		(44,269)		(36,969)
Interest expense	(420)		(359)		(811)		(631)
Mortgage banking income	39,202		15,026		97,789		26,482

*Income before taxes*	417,465		209,831		729,471		371,206
Income tax (expense) benefit	(96,170)		(45,756)		(159,414)		(31,428)

*Net income*	$	321,295	$	164,075	$	570,057	$	339,778

*Basic earnings per share*	$	88.69	$	44.56	$	156.27	$	92.52

*Diluted earnings per share*	$	82.45	$	42.50	$	145.53	$	87.56

*Basic weighted average shares outstanding*	3,623		3,682		3,648		3,673

*Diluted weighted average shares outstanding*	3,897		3,861		3,917		3,881

NVR, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

	June 30, 2021		December 31, 2020
ASSETS
*Homebuilding:*
Cash and cash equivalents	$	2,597,565	$	2,714,720
Restricted cash	42,543		28,912
Receivables	24,484		18,299
Inventory:
Lots and housing units, covered under sales agreements with customers	1,792,293		1,484,936
Unsold lots and housing units	131,668		123,197
Land under development	7,794		62,790
Building materials and other	41,618		38,159
	1,973,373		1,709,082

Contract land deposits, net	425,301		387,628
Property, plant and equipment, net	54,379		57,786
Operating lease right-of-use assets	61,740		53,110
Reorganization value in excess of amounts allocable to identifiable assets, net	41,580		41,580
Other assets	215,168		203,399
	5,436,133		5,214,516
*Mortgage Banking:*
Cash and cash equivalents	20,757		63,547
Restricted cash	3,688		2,334
Mortgage loans held for sale, net	344,680		449,760
Property and equipment, net	4,236		4,544
Operating lease right-of-use assets	11,627		12,439
Reorganization value in excess of amounts allocable to identifiable assets, net	7,347		7,347
Other assets	25,968		22,654
	418,303		562,625
Total assets	$	5,854,436	$	5,777,141

NVR, Inc.
Consolidated Balance Sheets (Continued)
(in thousands, except share and per share data)
(unaudited)

	June 30, 2021		December 31, 2020
LIABILITIES AND SHAREHOLDERS' EQUITY
*Homebuilding:*
Accounts payable	$	380,957	$	339,867
Accrued expenses and other liabilities	419,454		440,671
Customer deposits	365,443		240,758
Operating lease liabilities	67,413		59,357
Senior notes	1,516,830		1,517,395
	2,750,097		2,598,048
*Mortgage Banking:*
Accounts payable and other liabilities	49,605		62,720
Operating lease liabilities	12,446		13,299
	62,051		76,019
Total liabilities	2,812,148		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 June 30, 2021 and December 31, 2020	206		206
Additional paid-in capital	2,314,564		2,214,426
Deferred compensation trust – 106,697 shares of NVR, Inc. common stock as of both June 30, 2021 and December 31, 2020	(16,710)		(16,710)
Deferred compensation liability	16,710		16,710
Retained earnings	9,381,177		8,811,120
Less treasury stock at cost – 16,976,140 and 16,859,753 shares as of June 30, 2021 and December 31, 2020, respectively	(8,653,659)		(7,922,678)
Total shareholders' equity	3,042,288		3,103,074
Total liabilities and shareholders' equity	$	5,854,436	$	5,777,141

NVR, Inc.
Operating Activity
(dollars in thousands)
(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
*New orders, net of cancellations:*
Mid Atlantic (1)	2,090	$	535.4	2,381	$	443.0	4,381	$	518.1	4,442	$	442.6
North East (2)	394	$	499.3	369	$	375.7	834	$	486.3	727	$	378.9
Mid East (3)	1,320	$	375.7	1,536	$	315.6	3,115	$	361.1	2,761	$	320.3
South East (4)	1,717	$	360.3	1,615	$	296.1	3,505	$	348.7	2,986	$	300.5
Total	5,521	$	440.2	5,901	$	365.4	11,835	$	424.4	10,916	$	368.6


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	Units	Average Price		Units	Average Price		Units	Average Price		Units	Average Price
*Settlements:*
Mid Atlantic (1)	2,224	$	471.4	1,931	$	434.9	4,234	$	468.7	3,726	$	433.1
North East (2)	433	$	446.3	262	$	374.9	805	$	441.5	543	$	376.3
Mid East (3)	1,404	$	340.6	945	$	317.4	2,667	$	338.6	1,930	$	321.6
South East (4)	1,624	$	310.7	1,158	$	302.9	3,051	$	309.8	2,327	$	303.2
Total	5,685	$	391.3	4,296	$	369.8	10,757	$	389.3	8,526	$	368.8

	As of June 30,
	2021			2020
	Units	Average Price		Units	Average Price
*Backlog:*
Mid Atlantic (1)	4,626	$	517.7	4,328	$	448.7
North East (2)	979	$	485.7	771	$	403.5
Mid East (3)	3,322	$	364.8	2,644	$	327.5
South East (4)	3,700	$	359.0	2,880	$	309.2
Total	12,627	$	428.5	10,623	$	377.5

NVR, Inc.
Operating Activity (Continued)
(dollars in thousands)
(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
*Average active communities:*
Mid Atlantic (1)	153			188			156			189
North East (2)	32			41			33			40
Mid East (3)	126			141			133			139
South East (4)	109			114			110			111
Total	420			484			432			479


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
*Homebuilding data:*
New order cancellation rate		8.3	%		15.7	%		9.0	%		18.1	%
Lots controlled at end of period							114,100			102,000

*Mortgage banking data:*
Loan closings	$	1,565,095		$	1,144,428		$	2,977,974		$	2,276,531
Capture rate		89	%		89	%		89	%		90	%

*Common stock information:*
Shares outstanding at end of period							3,579,190			3,689,088
Number of shares repurchased	78,452			—			164,975			57,611
Aggregate cost of shares repurchased	$	376,941		$	—		$	754,366		$	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