Century Communities, Inc.

Good day and welcome to Century Community's third quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Tyler Langton, Senior VP of Investor Relations. Please go ahead.

Good afternoon. Thank you for joining us today for Century Community's earnings conference call for the third quarter of 2022. Before the call begins, I would like to remind everyone that certain statements made during 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 2021 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 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, Tyler, and good afternoon, everyone. We are very pleased with our strong performance this quarter, including $172 million in pre-tax income, net income of $144 million, and diluted earnings per share of $4.44. The achieved levels of pre-tax income, net income, and earnings per share were all third quarter records and represented increases of 18% 27% and 34% respectively from the prior year quarter. Our third quarter EBITDA came in at $189 million, a 16% year-over-year increase, and another third quarter record. During the quarter, we delivered 2,630 homes for $1.1 billion in revenues, both third quarter records. On a year-over-year basis, our average sales price increased by 8% to $425,000, while our deliveries increased by 13%, led by our Texas, Southeast, and Century Complete segments. With regards to Hurricane Ian, we want to first and foremost express our deepest sympathies to all the people and communities that were affected by this tragic event. The hurricane had a modest impact on our total deliveries in the quarter, and we would expect additional impacts in the fourth quarter due to disruptions to the supply chain, municipalities, and labor availability throughout our Florida and Southeast regions. Our backlog at quarter end consisted of 3,455 sold homes valued at $1.4 billion. Net new contracts declined to 1,318 homes with weakness across all our regions, as we believe the rapid increases in mortgage rates and overall economic uncertainty kept many homebuyers on the sidelines. The summer season for homebuying is typically the slowest period of the year, and this trend was especially pronounced this year as many potential homebuyers simply took the summer off. Regarding trends in the quarter, net new contracts increased each month throughout the quarter, with this improvement in sales pace continuing into October. In fact, the sales activity we experienced this last weekend was the strongest we have seen in over six months. However, we expect home sales will continue to be pressured by the volatility that we are seeing in interest rates. We believe underlying demographics remain favorable, and as rates stabilize, buyers will return to the market as they adjust to these changes. While a 7% mortgage rate is clearly a large increase from levels at the beginning of the year, mortgage rates average close to 6.5% from 2000 to 2008, and a little over 8% in the 1990s. Homebuyers are continuing to look for homes that are closer to completion in order to lock in their interest rates, and our sales continue to be impacted by the fact that we simply did not have a significant number of homes available for a near-term move-in. Going forward, Our plan is to continue to match our starts with our sales, focus our sales efforts on homes with more near-term completions, and not start building up significant backlog until we see a sustainable improvement in demand. Consent on closed homes in the third quarter increased as expected to about 300 basis points of average sales price. The type and amount of incentive differs by community and by market. We have seen mortgage rate buy downs, rate locks, and discounts on options and upgrades to be effective in getting buyers in the door and signing contracts. We are not typically reducing base prices in existing communities, but are making sure our prices are competitive with the market when opening new communities. Our focus on operational fundamentals enabled us to produce solid gross margins of 24.8% and adjusted gross margins of 26% in the third quarter. As expected, our gross margins eased from what we have characterized as unsustainably high levels, with higher incentives being the largest driver of the decline. Looking out over the next couple of quarters, we think margins will overcorrect as our incentives are now meaningfully higher than they were in the first half of the year, while our costs on new home starts are just beginning to ease. That said, we do expect to return to more normalized home building margins, possibly in the second half of 2023. The homes that we are starting now are seeing improved margins, as we are focused on producing even more affordable homes and given the fact that input costs are continuing to fall, which Rob will detail more fully in his comments. We are well positioned to navigate the current headwinds given our emphasis on delivering affordable homes and the flexibility inherent in our model. By offering homes at the lower end of the pricing spectrum, We can appeal to the largest number of potential homebuyers and to the homebuyers that are buying more out of need as compared to a move-up buyer making a discretionary purchase. Our spec-based model also allows us to adjust starts and react quickly to changes in market conditions. While it is still early, we believe this cyclical downturn could potentially create opportunities for Century given past precedents. We remained profitable every year during the great financial crisis, were patient, and ultimately acquired assets at attractive prices and emerged as a stronger company. Our third quarter results are due to the dedication, commitment, and resilience of our talented teams across the country. They continue to support our mission of providing our customers a home for every dream, and we thank them for their contributions. I'll now turn the call over to Rob to discuss our operating results and plans going forward in more detail.