Century Communities, Inc.

Greetings. Welcome to Century Communities' third quarter 2021 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 that this conference call 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 earnings conference call for the third quarter ended September 30th, 2021. 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 Franceskin, Co-Chief Executive Officer and President, and David Messinger, Chief Financial Officer. Following today's prepared remarks, we will open the lineup for questions. With that, I will turn the call over to Dale.

Thank you, Hunter, and welcome everyone to our quarterly conference call. We are now more than three-fourths through the year and are pleased to report a continuation of the strong home building dynamics that we experienced earlier in the year enabling us to achieve record-setting performance. Excluding charges related to debt extinguishment, pre-tax income for the third quarter was $160 million, net income was $125 million, and diluted earnings per share was $3.63, all company records. On a gap basis, pre-tax income increased 125%, to $146 million, and net income increased 129% to $114 million, or $3.31 per diluted share, driving our return on equity to 31%, our 10th sequential quarter of improved ROE, and nearly double the 16% at the end of the 2020 third quarter. Our home sales revenues were $917 million, a 21% increase on a year-on-year basis. This top line growth was a result of 2,322 total home deliveries propelled by double-digit increases within our West Region and Century Complete line. Home sales gross margins were 25.7%, an 820 basis point increase and the fifth quarter in a row of sequential improvement. Excluding interest, home building gross margins were 27.2% compared to 20% in the prior year quarter. We achieved an SG&A ratio of 9.8%, the result of our increased scale and the diversity of our geographic footprint, coupled with our success in managing and mitigating increased operational costs. This is our third quarter in a row of single digit SG&A ratio. Excluding charges related to debt extinguishment, our pre-tax income margin improved to 16.7%, reflecting the seventh quarter of sequential improvement and an increase of 850 basis points over the same period in the prior year. Our impressive results were achieved while maintaining a strong balance sheet with $1.3 billion of liquidity, a conservative net home building debt to net capital ratio of 23.1%, and increasing stockholders' equity to over $1.6 billion, a 35% year-over-year increase. We ended 3Q with a company record backlog of 4,000, 866 homes valued at over $1.9 billion. Consistent with our expectations, net new home contracts decreased to 2,742 compared to 3,204 contracts in the prior year. This anticipated decrease, as previously communicated on our second quarter earnings call, was due to a reduction in the number of homes available for sale resulting from robust sales earlier in the year, causing communities to sell out much earlier than expected. Additionally, we released homes for sale later in the construction process than typical in order to ensure all current input costs were captured. We have opened in excess of 125 new communities year to date and expect to open over 40 in Q4. While we have experienced delays in land development activities for both our self-developed communities as well as those being developed for us by third parties, we expect our open and actively selling communities to be above 200 by the year end with incremental improvement each successive quarter thereafter. We remain committed to a land light acquisition strategy as reflected by our percentage of controlled lots increasing to 67% compared to 56% last year. This is the seventh consecutive quarter we've increased our overall percentage of controlled lots and our highest percent since going public in 2014. Our focus on a land light model frees up capital, de-risks the business, and provides us increased flexibility to quickly adapt to changing market conditions. This strategy is further reflected in our inventory composition, where the percentage of inventory dollars invested in land has decreased to approximately 40%, compared to 44% in the third quarter of last year. As we have increased our investment in homes under construction by 27%, to meet the continued broad-based demand we are experiencing, while only increasing our investment in owned land by 5% during the same period. We are extremely pleased with our third quarter results, as well as our year-to-date performance. Looking ahead, we remain confident that tight supply, historically low interest rates, and favorable demographic trends will continue to support new home demand. Net income for the first nine months of 2021 has already exceeded the entirety of 2020 by over 60%, and we are on track to more than double the prior year by the end of the fourth quarter. Our substantial land portfolio positions us strongly for ongoing organic growth as we expand beyond and more deeply into our over 40 high growth markets. With that, I'll turn the call over to Rob to discuss our business in greater detail.