Landsea Homes Corporation

Ladies and gentlemen, greetings and welcome to the Landsea Homes Corporation fourth quarter 2022 earnings conference call. At this time, all participant lines are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Drew McIntosh. Please go ahead.

Good morning, and welcome to Lancey Holmes' fourth quarter of 2022 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 Homes 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. You should not place undue reliance on these forward-looking statements in deciding whether to invest in our security. 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 as may be required under applicable securities laws. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Lansi Home's 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 the call over to John.

Good morning, and thank you for joining us today as we go over our results for the fourth quarter and full year 2022 and give our thoughts on the outlook for our industry and our company. Lancy Homes generated total revenue of over $1.4 billion and pre-tax income of $101 million and earnings of $1.70 per diluted share for fiscal year 2022. all records for our company. We closed 2,370 homes during the year, representing a 45% increase over 2021 and expanded home sales gross margin by 290 basis points to 20.4%. We also returned capital to our shareholders in an earning accretive manner through our share repurchase program and increased our book value per share by 20% to $16.04. We achieved these financial and operational milestones while growing our presence in key home building markets, maintaining a strong balance sheet. I want to thank all our team members for their contributions to this record setting year and applaud them for overcoming the operational challenges our industry faced while executing on our business plan. While 2022 was a record setting year in terms of profitability, it was also a year in which the demand environment became more challenging. due to a rapid rise in mortgage rates and a subsequent decline in home buyer confidence. This change in market dynamics caused buyers who were in the market for a new home to become more cautious and prompted buyers in our backlog to cancel their purchase contract. As a result, our net new order activity in the third and fourth quarters dropped off significantly as compared to the prior year. We believe this is a natural reaction to the sudden change in affordability brought by the rise in interest rates, and have taken action through the use of incentives and price adjustments to regain momentum on the sales front. Fortunately, we have begun to see some improvement in market conditions starting in December, and this carried into the new year. We expect near-term demand conditions to remain volatile and subject to changes in mortgage rates and other macro factors. However, we are encouraged by the success of our sales efforts to start the year. In response to the more uncertain demand environment, we have placed an increased emphasis on cost reduction, balance sheet strength, and cash flow generation. In terms of cost reductions, we are proactively negotiating with our suppliers, vendors, and contractors to make sure that the prices we are paying reflect the new market realities. We have experienced significant input cost inflation over the last few years, expect those trends to reverse as the current slowdown works its way through the home building ecosystem. We are also working on establishing more favorable vendor agreements with our national suppliers that factor in our increased size and scale. While land prices typically take longer to adjust during a market correction, we remain disciplined with our land acquisition efforts and have walked away from several current transactions and are prepared to walk away from option agreements should they no longer meet our hurdle rates. We have also made changes to our overhead cost structure, reducing headcount by approximately 8%, which would improve our operational efficiency and expense leverage. As we announced earlier this week, we are relocating our corporate headquarters to Dallas, Texas, from Southern California, a move that should provide cost savings over time that will allow us to operate more effectively as a national homebuilder. This move should also signal our commitment to growing our homebuilding presence in that state. With respect to the balance sheet, we ended the year at the low end of our targeted debt-to-cap range at 41.6%. We also had $141 million in cash and $160 million available under our revolving credit facility. giving us plenty of liquidity to operate from a position of strength. We also extended the term of our credit facility, pushing out the maturity date to 2025. Our current plan calls for a reduction in land acquisition and development relative to 2022, which would put us in a great position to generate cash from operations, giving us additional optionality to pay down debt, reinvest in our operations should more favorable opportunities arise, or return capital to shareholders. Our board of directors recently approved extending our $10 million share repurchase authorization, giving us the added option of buying our stock with excess cash. We accomplished a lot in 2022 from both a strategic and financial standpoint that has poised us well to continue to drive our home building operations to the next level. We've established a presence in some of the best markets in the country and have quickly scaled our operations, thanks to great execution by our teams, our affordable product focus, and the appeal of our high-performance homes. Our strong financial condition gives us the stability to operate with confidence during uncertain times and take advantage of opportunities should they arise. As a result, I remain very confident in the future of Lansing Homes. With that, I'd like to turn the call over to Mike, who will provide more detail on our operations.