Landsea Homes Corporation

Good afternoon, and welcome to Lancey Holmes' first quarter earnings call. Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the federal securities laws. Lancey Holmes cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. These risks and uncertainties include, but are not limited to, the risk factors described by Lancey Holmes in its filings with the Securities and Exchange Commission. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. And you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except it may be required under applicable securities laws. Additionally, reconciliation of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Lancey Holmes' website and in its SEC filings. Hosting the call today are John Ho, Lancey's Chief Executive Officer, Mike Forsum, President and Chief Operating Officer, and Chris Porter, Chief Financial Officer. With that, I'd like to turn the call over to John.

Good afternoon, and thank you for joining us today as we go over our results for the first quarter of 2022. and provide some insight into the outlook of our industry and our company. Lansley Homes reported net income of $13 million or earnings of $0.28 per diluted share in the first quarter of 2022, a significant improvement over the net loss of $7 million or $0.16 per diluted share reported in the first quarter of 2021. On an adjusted basis, which excludes the impact of purchase price accounting for acquired inventory and losses associated with the remeasurement of worn liability, net income for the quarter was $32.1 million, or $0.71 per diluted share. Home sales revenue grew 93% year-over-year on an 83% increase in deliveries as our teams did an outstanding job delivering homes in what continues to be a challenging operating environment. Home sales gross margin expanded 930 basis points year-over-year on a gap basis to 20.9% as the price increases we implemented on homes closed in the quarter stayed ahead of cost inflation. We also ended the quarter with 1,605 homes in backlog with a dollar value of $930 million, putting us in a great position to deliver on our goals for the remainder of the year. These results are a testament to the ongoing strength of the new home construction industry and further proof that Lansi Homes can successfully scale its operation in a profitable manner. We experienced healthy order trends across our home building platform in the first quarter, as evidenced by our sales pace of 3.9 homes per community per month. This sales pace could have been higher for the quarter were we not constrained by the supply chain issues that continue to plague our industry. While these operational headwinds have made it difficult to close homes in a timely manner, they have also kept a lid on new home supply, which has helped maintain a sense of urgency among buyers and create a natural floor for new home pricing. We continue to make progress in our efforts to scale operations in some of the best home building markets in the country during the first quarter. Polo lot count at the end of the quarter stood at 12,768 lots. representing a 95% increase over the first quarter of 2021. These slots are located in markets like Orlando, Austin, and Phoenix, which are experiencing high population growth and rapid home price appreciation, thanks to strong local economies and ongoing migration to lower-cost areas of the country. We believe these markets have a long runway for growth, given the positive demand drivers in place, which should benefit Lansi for years to come given our sizable investments in these markets in recent quarters. It is important to note that our rapid growth has not come at the expense of profitability. We have been extremely disciplined with our land acquisition efforts, whether it be organic or through M&A, and as a result, have posted strong margins despite the headwinds associated with purchase price accounting adjustments. In addition, we have increased our lot count in the most capital-efficient manner possible. tying up lots via option agreements and land banking arrangements when available. At the end of the first quarter, 53% of our lots were controlled, 47% were owned. We believe that controlling a substantial number of lots via option agreements helps de-risk our portfolio and gives us additional financial and operational flexibility while enhancing our return profile over time. That's the end of the first quarter with a lot of momentum. thanks to the continued strong fundamentals we see in our market and the progress we made scaling our home building operations. Both management and the board have great confidence in our strategy and our ability to execute in today's market. To show this confidence, we began repurchasing our stock in the quarter and anticipate further share repurchases in the coming quarters, as we believe our stock represents a great value given our current outlook. With that, I'd like to turn the call over to Mike, who will provide more detail operational results this quarter. Mike?

Thanks, John, and good afternoon to everyone. 2022 is off to a great start for Lansing Homes as we exceeded our stated guidance for new home closings and average sales prices in the first quarter, achieved solid profitability, and generated strong orders that resulted in a company record backlog both in terms of units and value. We saw positive demand trends in each of our divisions, as the combination of great market fundamentals, well-located communities, and a limited supply of new and existing home inventory created a favorable sales environment. Our sales efforts were bolstered by our focus on the more affordable segments of the market, which continues to be one of the healthiest areas of demand. Our sales efforts also got a boost from our high performance home platform, which features the latest in new home automation, sustainability, energy savings, and healthy lifestyle amenities. We believe that this focus on new home innovation at an attainable price appeals to a number of demographic segments and has been instrumental in our sales success. We generated 637 orders in the first quarter, representing a 50% increase over the first quarter of 2021, driven largely by a 101% increase in our active community count. Order activity remained fairly consistent throughout the quarter, even as rates started to rise. Sales activity stays strong into April, as we generated 184 orders on a sales pace of 3.9 per community. This figure remains somewhat constrained, as John mentioned, as we continue to meter our sales efforts to better align our production capabilities. While higher rates are no doubt a headwind for our industry, we still see more qualified buyers in our markets than there is available supply. We are keeping a watchful eye on our backlog in light of the recent rise in mortgage rates and are doing everything we can to minimize their effect. Buyers in backlog who finance their home purchases through our mortgage affiliate have a strong credit profile with an average loan-to-value of 82%, an average FICO score of 741, and an average annual household income of $164,000. We stress tested the backlog up to 6% mortgage rate and believe the fallout will be in the single digits, and the average debt-to-income level will remain in the low 40% range. We have been proactively reaching out to our existing buyers and backlog, particularly ones with extended lead times to close, and encouraging them to get rate locks in place. So far, we have seen very few buyers fall out of backlog as a result of rising rates and have noticed real commitment on their behalf to complete the purchase of their home. Now, I would like to turn the call over to Chris, who will give more detail on our financial results this quarter and provide an update to our forward-looking guidance. Chris?