Century Communities, Inc.

Greetings. Welcome to Century Community's second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to Hunter Wells, Vice President of Investor Relations for Century Communities. Thank you. You may begin.

Good afternoon. Thank you for joining us today for Century Community's second quarter 2020 earnings conference call. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in the forward-looking statements. Certain of these risks and uncertainties can be found under the heading Risk Factors in the company's most recently filed annual report on Form 10-K, as supplemented by our other SEC filings. Our SEC filings are available at www.sec.gov and on our website at www.centurycommunities.com. The company undertakes no duty to update any forward-looking statements that are made during this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. The company's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Management will be available after the call should you have any questions that did not get answered. Hosting the call today are Dale Franciscan, Chairman and Co-Chief Executive Officer, Rob Franciscan, Co-Chief Executive Officer, and David Messinger, Chief Financial Officer. Following today's prepared remarks, we will open up the line for questions. With that, I will turn the call over to Dale.

Thank you, Hunter, and good afternoon to everyone on the call. On our last call in April, we described the strategic actions implemented to protect the health and well-being of our team members, homebuyers, homeowners, and trade partners while we continue to build, sell, and close homes across our national platform. We also discussed steps being undertaken to generate cash flow, reduce debt, and increase our liquidity. As we look back at those decisions, which were made rapidly and in a period of significant uncertainty, we are very pleased not only with the actions taken, but more importantly, with the exceptional second quarter results these actions generated, including double-digit revenue growth, expanded profitability, and our highest quarter ever, of both new home deliveries and net new home contracts. Following a 1% decline in April, May and June rebounded strongly with both months enjoying a 33% year-over-year increase in net new contracts, a trend which has even increased so far in July. Home sales revenues increased 23% to $747 million on a 26% improvement in deliveries to a record 2,480 homes. Adjusted net income increased 71% to a record $40.3 million, and absorptions increased an impressive 33% year-over-year to five sales per month per community, the highest rate in the company's history. In addition to our improved top and bottom line, we made significant progress on our goal of realizing cost efficiencies across our businesses. SG&A as a percent of home sales declined to 11.6%, an 80 basis point improvement over the second quarter last year, and 130 basis point sequential improvement compared to the first quarter of this year. We expect to realize ongoing savings from the cost reduction measures we took earlier in the year. We also took steps to strengthen our balance sheet, by paying down the full $522 million on our line of credit and dramatically improving our net debt to net capital leverage ratio to 37.5%, a 910 basis point improvement from the first quarter. Collectively, these results are strong evidence of the adaptability of our business model and our team's ability to execute on our playbook and navigate through a difficult and uncertain environment while meeting the substantial ongoing demand for new homes at entry-level price points across our national footprint. Over the last two quarters, we've continued to expand our investment in and employ the use of digital technologies to further serve homebuyers through online reservation and contracting capabilities, virtual tours and appointments, video walkthroughs, electronic earnest money transfers, and the like. We have enhanced our online chat features that directly connect customers with on-site agents where they may browse communities, ask questions, and coordinate appointments. Even with some sales offices still operating on an appointment-only basis, through our online platform, homebuyers can not only explore our product offerings, but actually purchase the home and apply for a mortgage, all with the click of a button, and without the need to personally interface with a salesperson. Depending on a buyer's preference, we offer the opportunity to meet face-to-face, distantly, or not at all. Our financial services company also ramped their digital efforts to provide a convenient virtual one-stop financing and closing experience. Because of these increased capabilities, total company web traffic improved 66% on a year-over-year basis in the second quarter. We've also been intently focused on carefully managing our supply chain to mitigate any potential interruptions. Our supply chain is built on a network of extensive national agreements, and these relationships enable us to swiftly address any challenges that may arise. Not only do our supplier partners provide us with preferential treatment in many cases, but if a building material becomes scarce, our team is adept at rapidly finding alternative materials at a comparable price to enable a project to move forward without delays or cost increases. As certain challenges arose during the second quarter, we successfully managed through these issues without incurring additional costs or missing any closings. The continued execution on our growth strategy and delivery of robust results is a reflection of the strength and resiliency of our business and the ability of our team to be agile and adjust to unexpected circumstances. Throughout the second quarter, we saw sequential month-over-month sales improvement due to our product positioning, the effective work of our sales teams, and our robust online sales tools. As the quarter progressed, we experienced decreases in our cancellation rate from a high of 21% to a low of 15% in June, averaging 19% for the quarter. The ongoing social distancing guidelines and remote working arrangements resulting from the pandemic have fueled demand for homes as we witness an outbound migration from both apartments and more urban areas taking place. Buyers are taking advantage of historically low interest rates, which for the first time in a half century fell below 3%. A lack of resale competition has helped demand within the new home market as resale inventory decreased 30% year over year nationwide in nearly every major new home market, while new home sales increased significantly. The home building industry is one of the brightest spots in the economy, and is experiencing an extremely positive macro environment. The opportunity to work remotely has allowed homebuyers to search for homes to purchase in less urban and less costly areas of the country. We are confident these positive trends will help support continued demand for our homes. While this year has been marked by many unforeseen challenges, our team is committed to executing our long-term initiatives and increasing our market share across our national footprint as we further scale our business. In July, Century Communities was again ranked as the ninth largest home builder in the country on Builder's Builder 100 list, and for a third year in a row, we were named the fastest growing public builder. We believe these acknowledgments reflect not only the trust that homebuyers have placed in Century, but also the quality of our employees across our local sales centers, construction sites, and various nationwide offices. We are truly grateful for our entire team, whom have effectively maintained their focus and attention throughout this unprecedented year to deliver exceptional homes and quality service to our customers. Looking ahead, we remain encouraged with our continued performance and competitive positioning across high potential markets. We are confident in our ability to drive further improvements in operational performance, deliver long-term value enhancement to our shareholders, and support our future growth over the balance of 2020 into 2021 and beyond. I'll now turn the call over to Rob to discuss our business and markets in more detail.