Harbor Custom Development, Inc.

Thank you for standing by and welcome to the Harvard Custom Development Incorporated third quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. The question and answer session from previously submitted questions will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to introduce today's presenters, Sterling Griffin, CEO, President, and Chairman of the Board, and Lance Brown, Chief Financial Officer. I will now turn the conference over to Mr. Brown. Please go ahead.

Thank you, Operator, and thank you all for joining us today. Welcome to Harbor Custom Development's third quarter 2022 earnings conference call. During our discussion today, we will be referring to our earnings press release and presentation that were made available prior to the call. The release and presentation can be found in the Investor Relations section of the Harbor website at www.harborcustomhomes.com. Before we begin, I would like to remind everyone that today's call includes forward-looking statements. Any forward-looking statements contained in the earnings release or discussed today are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from these forward-looking statements. Specifically included are statements regarding our industry and our outlook for 2022. Please see our recent SEC filings, which identify the principal risks and uncertainties which could affect future performance. We assume no obligation to update any forward-looking statements. In addition, we will be discussing or providing certain non-GAAP financial measures today, including EBITDA, adjusted EBITDA, and adjusted EBITDA margin. Please see the appendix of our earnings presentation for a reconciliation of these non-GAAP measures to their most direct comparable GAAP measure. I would now like to turn the call over to Sterling.

Thank you, Lance, and thanks to everyone for joining the call today. We appreciate your interest in Harbor Custom Development. I would like to begin by saying that our team performed at a high level during the third quarter. While our team's performance during the quarter may not be reflected in our financial results, throughout the quarter we made progress from a strategic and operational standpoint. Efforts to shift our inventory and focus more heavily on multifamily housing continue to advance. Multifamily projects now represent approximately 60% of our total real estate assets. We continue to advance work on each of the six projects highlighted during the second quarter earnings call. The construction of those projects remains on track with the first three scheduled for substantial completion by the end of the fourth quarter. We also monetized a smaller entitled land sale during the quarter and continue to earn additional fee billed revenues. These lower gross margin sales were partially offset by several higher margin single family home sales in our Texas market. As we continue to refocus our portfolio on more multifamily opportunities, we expect the revenue contribution from multifamily projects to account for more than 50% of total annual revenues for 2023. Rising interest rates, continued inflation, and broader market uncertainty continue to pose legitimate threats to the economy and have had a negative impact on home buyer confidence and affordability. The housing market has continued to weaken in response to the rapid increase in mortgage rates, which has substantially slowed the single-family home sales market nationally. As a result, and to recover lost momentum, we implemented certain market adjustments, including new pricing strategies and increased incentives across the majority of our markets. We believe our calculated move into the multifamily housing market puts us in a unique position to grow our business during this slowing economy. as multifamily properties are traditionally a more affordable alternative to purchasing single-family homes and have historically fared better during economic downturns. For more information on the performance of multifamily in down markets, please see our white paper on multifamily housing, which can be found in the presentation section of our website. As of September 30, 2022, our backlog of fully executed contracts for the sales of developed residential lots and single-family homes was 6.9 million. an increase of 81% from the prior year. Our fee build backlog as of September 30, 2022, was $2.1 million compared to $12.6 million in the prior year. The decrease in fee build backlog is primarily due to the progress we have made towards completion of our fee build projects previously under contract. While inventory varies across each market, we have deployed price reductions and or increased incentives to begin rebuilding the lost sales momentum. While the size of the reduction or incentive varies community to community, we believe these proactive measures will help us regain volume and momentum of sales. Our management team continues to monitor the market environment for changes to interest rates, pricing, or demand. We will address any significant changes in the market and make strategic decisions and or adjustments as necessary. I will now turn the conference call back to Lance Brown, our Chief Financial Officer, to further discuss our financial details.