Landsea Homes Corporation

Welcome to the Lancey Holdings Second Quarter Earnings Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Mr. Drew McIntosh, Corporate Investor Relations. Please go ahead, sir.

Good morning and welcome to Lancey Holmes' 2022 second 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 and 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 it was a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Additionally, reconciliations of non-GAAP financial measures discussed on this call, the most comparable GAAP measures, can be accessed through Lansi Holmes' website and in its SEC filings. Hosting the call today are John Ho, Lansi's Chief Executive Officer, Mike Forsum, President and Chief Operating Officer, and Chris Porter, Chief Financial Officer. With that, I'd like to turn it over to John.

Good morning, and thank you for joining us today as we go over our results for the second quarter of 2022 and provide an update on the company's outlook. Lansi Homes delivered another quarter of strong profitability, generating earnings of $0.34 per diluted share for the period, representing a 48% increase over the second quarter of 2021. Home sales revenue grew 46% year-over-year to $351 million. driven by a 35% increase in new home deliveries and a 9% increase to our average selling price. Home sales gross margin expanded 430 basis points year-over-year to 21.3% on a GAAP basis, or 560 basis points to 29.1% on a fully adjusted basis. These results are a testament to our company's strategic focus on scaling operations in high-growth markets while maintaining an emphasis on bottom-line results. Net new orders came in at 538 for the quarter, representing a 63% increase versus last year. Our sales pace averaged 3.3 homes per community per month during the period. However, demand tapered off as the quarter progressed. Combination of higher interest rates and lower consumer confidence has taken a toll on order activity across our home building platform and has created a more challenging sales environment for our industry. Fortunately, we believe Lansi has several distinct advantages that will allow us to compete effectively for buyers in this new environment. First, our company has established a presence in some of the strongest markets in the country with healthy job-to-permit ratios, expanding employment basis, and favorable in-migration patterns. These solid housing fundamentals should mute impact of macro headwinds over time. Second, we have intentionally focused our land acquisition efforts on the more affordable segments of the market in prime locations, positioning our company at the upper end of the entry-level segment. We believe this buyer segment is one of the strongest from a demographic perspective and should show more resiliency relatively to other buyer segments. Third, our investments in new home technology innovation through the creation of our high-performance home series give us a distinct selling advantage against the competition and provide a real value proposition for buyers in the market. While no builder is immune to the broader market forces that are currently impacting our industry, we believe Lansi has the right product in the right locations to navigate these uncertain times better than most. Supplementing our strong market position is our well-capitalized balance sheet and our risk-averse land-light strategy. In terms of our land position, we increased our lot count by 52% on a year-over-year basis during the quarter to just over 13,000 owned and controlled lots. This growth was driven by a 150% increase to our controlled lot count as our owned lot count actually decreased by 9%. At the end of the second quarter, 63% of our lots were controlled and 37% were owned. This trend is consistent with our land-life strategy, which emphasizes optionality and capital efficiency as a means to improve returns while limiting our exposure to market risk during periods of uncertainty. We believe our current land position puts Lansi in a great position to continue on its current growth trajectory should selling conditions improve and limits our downside exposure. should our market stay choppy for an extended period of time. In the second quarter, we acquired 5.1 million shares at an average price of $7.07. This includes purchasing 4.4 million shares from our controlling shareholder. This represents approximately 11% of our prior quarter's outstanding share count. We believe this was an attractive use of our capital, given our undervalued stock price. At quarter end, we had $10 million remaining on our share repurchase program authorization. Additionally, we retired all $5.5 million outstanding private warrants. Retiring the warrants will be beneficial in cleaning up the company's capital structure, remove large fluctuations caused by the warrants and reporting earnings quarter to quarter, and remove any dilutive overhang on the stock. Going public last year, we have been focused on creating shareholder value, and the retirement of the private warrants is another step in that direction. Furthermore, this event will result in a cleaner capital structure that will provide a positive backdrop for investors and shareholders. We accomplished these measures with virtually no impact to our leverage profile. The great land position, strong balance sheet, and a favorable product profile Lansi Homes is poised to navigate these uncertain times for our industry. In addition, our company is led by home building veterans who have experienced previous downturns and who know how to operate effectively during periods of market dislocation. Long-term outlook for our industry has not been diminished by the recent slowdown, thanks to the favorable demographic trends and lack of existing supply that should drive the new need for new housing. As a result, we remain optimistic about the future of Lansi Homes. With that, I'd like to turn the call over to Mike, who will provide more detail on our operational results for the second quarter.