Century Communities, Inc.

Greetings. Welcome to the Century Communities Third Quarter 2020 Earnings Conference Call. 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 Communities Third 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 Francescan, Chairman and Co-Chief Executive Officer, Rob Francescan, 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, everyone. The improvement in market conditions that we experienced in the latter half of the second quarter continued and even strengthened throughout the third quarter. Demand for our homes was exceptionally strong across our entire national platform of diversified and high-growth markets. We achieved multiple milestones in the third quarter, including record net new home contracts, record third-quarter home sales revenues, record third-quarter net income, and our highest pre-tax net income quarter ever. Our home deliveries grew 21% to a third-quarter record 2,283 homes, and net new home contracts increased 57% to 3,204 homes, the most in our history. Home sales revenues increased 32% to $760.2 million last with total revenues increasing 35% to $794.4 million, another company record. In addition to realizing double-digit top-line growth, we generated impressive profitability expansion. Pre-tax income was a record $64.9 million, and our pre-tax net income margin was 8.5%, a 240 basis point improvement over the prior year, and a sequential 180 basis point improvement from the second quarter. EBITDA increased 65% to a company record $87 million, reflecting increased cash flows as we improved our net home building debt to net capital ratio to 32.9%, down 20.9 percentage points from 53.8% in the third quarter last year, and a further 460 basis point sequential improvement compared to 37.5% at the end of the second quarter. Our expanded profitability and increased cash flows are compelling evidence for our success in achieving lasting efficiency gains as we continue to benefit from our larger scale and the operational improvements enacted over the past few years. SG&A as a percent of home sales declined to 11.3% from 12.7% in the third quarter of last year, and on a sequential basis, improved 30 basis points from the second quarter. In addition, adjusted home building gross margin percentage increased sequentially 50 basis points to 20%, primarily due to improved home price appreciation across our markets. Looking ahead, we expect to see continued margin improvement, as well as further efficiency gains from our previously enacted initiatives. Century is well positioned to benefit from multiple industry tailwinds that will sustain our growth through 2021 and beyond. The primary factor helping housing is historically low interest rates, currently below 3% for the first time in nearly half a century. Year to date, approximately 80% of our total deliveries were at entry-level price points. These buyers typically evaluate purchasing a home from a monthly payment perspective and often in relationship to rental expense. With the cost of borrowing at unprecedented lows, many buyers are moving up their timeline to purchase a home and secure a low interest rate that they can benefit from for years to come. As the Federal Reserve recently reiterated their commitment to maintaining low rates, it is expected that mortgage rates will remain favorable over the next several years. The U.S. also continues to experience a severe housing supply shortage, a condition which has only been exacerbated by the recent COVID-19 health crisis. Rarely have there been fewer homes for sale, with U.S. home sale inventory reaching a 40-year low just last month. While challenging for buyers, low supply is favorable to Century and other home builders as it bolsters new home demand. Across all of Century's markets, the number of homes available does not exceed a three-month supply rate with majority of markets between one and two months of supply. This limitation in home supply is also contributing to price appreciation. We are seeing more millennials become buyers as they reach the prime age for new household formation, a trend which is expected to further drive entry-level new home demand. In the third quarter, over 60% of Century's total loan originations were for buyers between 25 and 45 years old. The US population of millennials represents a key home buying group that is expected to grow incrementally over the next decade. The recent pandemic has accelerated the outbound migration for apartments and urban areas to the suburbs. Due to social distancing orders earlier this year, many consumers spent months confined within their homes and are now prioritizing increased living and outdoor space in their decision to purchase a home. Additionally, the opportunity to work remotely has allowed homebuyers to search for homes to purchase in less urban and less costly areas of the country. These trends are fueling a shift from urban areas to the suburbs, and we expect this to positively support increased demand for our homes. In more ways than one, 2020 has been transformative for our society, particularly in how the COVID-19 health crisis has resulted in many of us spending more time at home than ever before. We are witnessing a shift in consumer lifestyle preferences from where we live to how we live to how we buy homes and even how we spend our money, all of which directly benefits builders such as Century. I'll now turn the call over to Rob to discuss these consumer shifts in our business in more detail.