NVR INC - FORM 8-K - EX-99.1 - October 20, 2020

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Exhibit 99.1
NVR, INC. ANNOUNCES THIRD QUARTER RESULTS

October 20, 2020, Reston, VA—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 were 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.
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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.
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NVR, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Homebuilding:
Revenues$1,920,751 $1,873,331 $5,065,216 $5,273,985 
Other income1,988 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 income280,954 251,782 641,058 671,868 
Interest expense(11,309)(6,008)(26,689)(18,034)
Homebuilding income269,645 245,774 614,369 653,834 
Mortgage Banking:
Mortgage banking fees69,261 37,933 127,692 124,484 
Interest income2,222 3,340 6,545 8,910 
Other income887 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 income51,812 21,400 78,294 76,659 
Income before taxes321,457 267,174 692,663 730,493 
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 outstanding3,706 3,672 3,684 3,631 
Diluted weighted average shares outstanding3,939 3,988 3,896 3,974 

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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 cash28,026 17,943 
Receivables21,461 18,278 
Inventory:
Lots and housing units, covered under sales agreements with customers1,541,587 1,075,420 
Unsold lots and housing units124,371 184,352 
Land under development63,608 69,196 
Building materials and other33,620 18,320 
1,763,186 1,347,288 
Contract land deposits, net377,105 413,851 
Property, plant and equipment, net58,570 52,260 
Operating lease right-of-use assets54,964 63,825 
Reorganization value in excess of amounts allocable to identifiable assets, net41,580 41,580 
Other assets204,343 176,144 
5,088,695 3,242,061 
Mortgage Banking:
Cash and cash equivalents21,546 29,412 
Restricted cash3,172 2,276 
Mortgage loans held for sale, net340,927 492,125 
Property and equipment, net4,896 5,828 
Operating lease right-of-use assets13,376 13,345 
Reorganization value in excess of amounts allocable to identifiable assets, net7,347 7,347 
Other assets19,961 17,421 
411,225 567,754 
Total assets$5,499,920 $3,809,815 


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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 deposits211,122 131,886 
Operating lease liabilities61,382 71,095 
Senior notes1,517,982 598,301 
2,520,655 1,410,304 
Mortgage Banking:
Accounts payable and other liabilities45,906 43,985 
Operating lease liabilities14,366 14,282 
60,272 58,267 
Total liabilities2,580,927 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, 2019206 206 
Additional paid-in capital2,188,207 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 liability16,710 16,912 
Retained earnings8,506,116 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' equity2,918,993 2,341,244 
Total liabilities and shareholders' equity$5,499,920 $3,809,815 


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NVR, Inc.
Operating Activity
(dollars in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,

2020201920202019
UnitsAverage PriceUnitsAverage PriceUnitsAverage PriceUnitsAverage 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,
2020201920202019
UnitsAverage PriceUnitsAverage PriceUnitsAverage PriceUnitsAverage 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,
20202019
UnitsAverage PriceUnitsAverage 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 

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NVR, Inc.
Operating Activity (Continued)
(dollars in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Average active communities:
Mid Atlantic (1)
170201183208
North East (2)
41344132
Mid East (3)
135136138131
South East (4)
11910211393
Total
465473475464
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Homebuilding data:
New order cancellation rate
11.8 %15.7 %15.8 %14.3 %
Lots controlled at end of period
103,200102,000
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
—18,02457,611 129,679 
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
Investor Relations Contact:
Curt McKay
(703) 956-4058
ir@nvrinc.com

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