Century Communities, Inc.

Greetings and welcome to the Century Community's fourth quarter and full year 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. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Hunter Wells, Vice President, Investor Relations.

good afternoon thank you for joining us today for century communities earning conference call for the fourth quarter and full year ended december 31st 2020. 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 Franceskin, Chairman and Co-Chief Executive Officer, Rob Franceskin, 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. We are pleased to report that in 2020, we achieved multiple milestones, including our 18th consecutive year of profitability, $3.2 billion in total revenues, a 25% increase, 10,822 net new contracts, a 38% increase, and 9,453 home deliveries, an 18% increase. These results again demonstrate our ability to achieve consistent double-digit revenue and delivery growth, reflecting the power of our business model and the appeal of our geographically diverse footprint. as we deliver new homes across the country's most active housing markets. In the fourth quarter, we generated record home sales revenues of nearly $950 million, a 22% increase, while increasing home deliveries by 14% to a company record 2,826 homes. During the quarter, we also increased our net new contracts by 45%, to a fourth quarter record of 2,566 homes. Our sales pace accelerated through the end of 2020 and into the beginning of 2021, with net new contracts for December increasing 54% and January increasing 77%, reflecting not only the resiliency of demand, but our ongoing sales momentum into 2021. We also made significant progress in growing our backlog, ending the year with 3,439 sold homes with a value of nearly $1.3 billion. More importantly, we drove significant profitability expansion, achieving our highest pre-tax income for both the fourth quarter and full year, and more than twice the prior year periods. Net income for the quarter and year also increased 72% and 82% respectively to $92 million and $206 million. Our cash flows continued to increase in the fourth quarter as reflected by an 87% increase in EBITDA to a company record $145 million. Our net home building debt net capital ratio also improved to 27.2% down 1,800 basis points from 45.2% in the fourth quarter last year and a 570 basis point sequential improvement compared to 32.9% at the end of the third quarter. We also achieved gross margin and SG&A leverage expansion. Adjusted home building gross margin percentage increased sequentially 300 basis points to 23% primarily due to improved home price appreciation across our markets as well as a reduced reliance on incentives. SG&A as a percent of home sales declined 80 basis points to 10.1%, the lowest in our history. This was down from 10.9% in the fourth quarter of last year and a sequential improvement of 120 basis points from the third quarter. In 2021, we expect to see continued margin and leverage improvement as we realize further operational efficiencies across our organization. Since going public in 2014, we've successfully expanded and diversified our footprint, primarily through acquisitions, while transforming our competitive positioning to become one of the largest home builders in the country. We've invested deeply into our platform to advance, synergize, and better position Century to thrive, not only in the current environment, but future housing cycles as well. Over the last two years, our focus on completing the integration of our past acquisitions, improving the visibility into all aspects of our business, and generating efficiencies from our growing scale and national platform have resulted in increased returns on equity. We believe that over the course of the next few years, we can further improve upon this achievement. In early 2020, we took prudent actions to strengthen our balance sheet by reducing expenditures, increasing liquidity, and accelerating asset turns in order to provide us with maximum flexibility to manage our organization and capitalize on opportunities as they arise. We are better situated than ever before to expand our scale and scope accelerate growth, and generate expanded profitability. Before the full effects of the pandemic were felt last year, housing demand was solid and picking up pace. At that time, there were already multiple demand drivers and industry tailwinds at play. We believe these trends are real and have considerable staying power. The primary factor is and continues to be record low interest rates. In January, The Federal Reserve reiterated its expectation to maintain low rates, while the Mortgage Bankers Association recently echoed a similar conviction. Recently, U.S. mortgage rates even hit a 30-year low of 2.65% compared to 3.64% one year ago. Additionally, there exists a severe housing shortage across the U.S. at all price points. This trend continues to intensify. Across the majority of centuries' markets, the estimated months of supply decreased on average by approximately 30% from the third quarter to the fourth, reflecting an average supply of 1.2 months and well below the national average of 2.3 months. In terms of demographics, the U.S. population of millennials represents a key home-buying group that is expected to grow incrementally over the next decade. An increasing number of baby boomers are also entering retirement, taking advantage of recent gains in home price appreciation, and either downsizing or refinancing their homes, both of which provide additional investable dollars to help grow the overall economy. Looking ahead to 2021, we are emboldened by these supportive tailwinds, which will not only propel incremental housing demand, but help spur expanded home price appreciation. We continue to raise prices across all of Century's markets throughout the fourth quarter and into January. We believe low mortgage rates, increased personal savings, and improved buyer credit profiles will allow us to increase price while maintaining affordability for buyers. Across our entire product portfolio, we are strongly positioned within the attractive, affordable new home category with nearly 80% of our 2020 deliveries qualifying for FHA loans. The FHA recently increased their floor and ceiling loan limits by approximately 7%, helping expand our pool of potential buyers, support our strategy to attract first-time and move-up home buyers, and drive accelerated growth for Century Complete. Over the past several years, we have built a strong foundation to solidly propel Century to even greater success. Our goal is to deliver our customers high-quality, beautiful homes at affordable prices while creating long-term shareholder value. Our national footprint, robust systems, and talented employee base competitively position us to grow our presence in existing markets as well as future ones. We were recently named one of Fortune's 100 fastest growing company, and one of America's most trusted home builders, outperforming nearly all of our peers. For this honor, as well as our success, we thank our exceptional team of 1,400 employees that share our drive, our passion, and our customer-first philosophy. I'll now turn the call over to Rob to discuss our business in more detail.