M.D.C. Holdings, Inc.

Good day and welcome to MDC Holdings 2022 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. 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 Derek Kimberley, Vice President and Chief Accounting Officer. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to MDC Holdings 2022 Fourth Quarter Earnings Conference Call. On the call with me today, I have Larry Meisel, our Executive Chairman, David Mandrychk, Chief Executive Officer, and Bob Martin, Chief Financial Officer. At this time, all participants are in a listen-only mode. After finishing our prepared remarks, we will conduct a question and answer session, at which time we request that participants limit themselves to one question and one follow-up question. Please note that this conference is being recorded and will be available for replay. For information on how to access the replay, please visit our website at MDCHoldings.com. Before turning the call over to Larry and David, it should be noted that certain statements made during this conference call, including those related to MDC's business, financial condition, results of operation, cash flows, strategies and prospects, and responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risk, uncertainties, and other factors that may cause the company's actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by the forward-looking statement. These and other factors that could impact the company's actual performance are set forth in the company's 2022 Form 10-K, which is expected to be filed with the SEC today. It should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures. Any information required by Regulation G is posted on our website with our webcast slides. And now I will turn the call over to Mr. Meisel for his opening remarks.

Thank you for joining us today for a review of our operating results for the fourth quarter and full year 2022. and an update of our strategy for navigating today's new home landscape. MDC reported net income of $562.1 million for the 2022 full year, or $7.67 per diluted share, representing one of the most profitable years in our company's history. We generated $5.6 billion in home building revenues and produce a gross margin from home sales of 22.4%, which is a testament to the strong demand environment we experienced earlier in the year and solid execution by our home building teams despite persistent operational headwinds. We are proud of these accomplishments, and I want to thank all of our team members for their contributions in making 2022 such a profitable year. As we turn our attention to 2023, we face a much different housing environment than the one that was in place at the beginning of 2022. The demand tailwinds we enjoyed in 2021 and the first half of 2022, namely low mortgage rates, and high consumer confidence turned against us in the second half of the year, creating a much more difficult selling environment. Buyers became more cautious, and the value proposition that home ownership presented became much less compelling through the combination of rapid home price appreciation and higher financing costs. These headwinds led to a sharp drop in new order activity and a big increase in cancellations in the third and fourth quarter, resulting in a much smaller backlog to start 2023 as compared to the beginning of 2022. In response to these new market realities, we have taken decisive steps to adjust our business practices and stay competitive in our markets. We delivered a significant portion of our high margin backlog in the third and fourth quarters of 2022, allowing us to be more aggressive in our approach to pricing and incentives as we enter the spring selling season. We realize that most homebuyers are trying to solve for a monthly payment that meets their budget, And we have multiple levers that we can use to address their affordability needs. In addition, we have increased and expect to continue to increase our spec home construction starts to appeal to buyers who are willing to forego some personalization with their homes in exchange for a faster close. This should keep our inventory turns moving in the right direction, help reduce our cycle times, and reduce the number of cancellations as compared to the previous two quarters. Another way we're bringing our cancellation rate down is through higher deposit requirements and our bill-to-order homes. Buyers in general must now put down 5%. in order for us to move forward and a new build versus the 2% we required in more favorable times. In addition, we have modified our deposit requirements on options and upgrades purchased at our home gallery studios. These changes should result in a more stable backlog and give us better visibility into our delivery schedules for our build to order homes. Despite the near term challenges facing our industry, we remain confident in the long term outlook for new home construction. Existing home inventory remains at a historically low level on a national basis and there continues to be a strong desire for home ownership by a large segment of the population. We believe that comparisons made between this housing correction and the one we experienced during the 2007 and 2008 financial crisis are unwarranted. U.S. households are in a much better shape today than they were 15 years ago, and today's unemployment levels remain incredibly low despite the best efforts of the Federal Reserve to slow the economy. In addition, we have a much more stable and closely regulated mortgage finance system in place today, which has curtailed much of the speculative activity that led to the last downturn. We also have the benefit of hindsight and wisdom that comes from weathering a difficult downturn, which has led to a more resilient and return-focused industry. All of these factors give us confidence in the future of our industry and the outlook for our company. Now I'd like to turn the call over to David, who will provide more detail on our operating results this quarter.