M.D.C. Holdings, Inc.

Good day and welcome to the NDC Holdings 2023 first quarter 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 touchtone 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 Derek Kimmerle, Chief Accounting Officer. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to MDC Holdings 2023 First Quarter Earnings Conference Call. On the call with me today, I have Larry Meisel, our Executive Chairman, David Mandrich, 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 risks, 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 first quarter 2023 Form 10Q, 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 as we go over our results for the first quarter of 2023 and share our thoughts on current market conditions. MDC generated net income of $81 million in the first quarter of or $1.08 for diluted shares. We delivered 1,851 homes during the three-month period, well in excess of our previously stated guidance, as our team did an excellent job of closing buyers and backlog and delivered spec homes to quick move-in buyers. Our focus during the quarter skewed more towards generating sales versus holding pricing, as we were willing to sacrifice some margin to keep the momentum going in our home building operations. We believe this is the right strategy for today's market, where buyers continue to be motivated to own a home but remain sensitive to changes in affordability. Our net order total increased significantly in the first quarter of 2023 relative to the fourth quarter of 2022. As buyers adapted to the higher rate environment, we adjusted our pricing and incentive levels to spur sales activity. Cancellations also declined dramatically from the fourth quarter thanks to the more stable market conditions and higher deposit requirements we implemented to build to order homes. We generated 1,767 net new orders for the quarter on an absorption pace of 2.6 homes per community per month. Our gross order total came in at 2,520. Both net and gross orders increased on a sequential basis each month of the quarter, underscoring the positive momentum we experience at our communities. We feel we are in position to maintain this order momentum based on the activity we see at most of our communities and the focus we have on more affordable segments of the market. Our net sales of the company will benefit from a higher community count this year as compared to last year. From a macro perspective, we believe the new home industry continues to benefit from a number of tailwinds. Existing home inventory remains constrained according to the most recent release from the National Association of Realtors, which shows there were 980,000 homes for sale nationally. This represents a 2.6-month supply of homes at the current sales pace. Employment data continues to be encouraging, and with continued job growth and low unemployment, mortgage interest rates have stabilized during the quarter and even retreated from recent highs. All these factors contribute to the favorable fundamental background we see powering our industry. At the local level, we believe our home building operations will continue from the in-migration and strong job growth patterns that have characterized our markets. We have an established presence in some of the highest growth MSAs in the country. We are attracting employers and high wage earners from other locations. We believe these migration trends will continue, give us a natural pipeline of new home demand in the coming months. MDC should continue to benefit from the size and scale advantages we have over the smaller private builders in our markets. Our ability to procure land, labor, and materials necessary for our business is key to our success. Given our scale in the markets we operate, we can typically accomplish this on more favorable terms than most of our smaller competitors. We also have an advantage when it comes to cost and access to capital. a factor that has only become more important in the recent regional banking turmoil. We ended the first quarter with a cash and marketable securities balance of over $1.6 billion, which is a testament to our ability to adjust our capital spending plans and generate liquidity when we feel it's appropriate. We've structured our balance sheet to withhold slowdowns in the market like we experienced at the end of last year and to take advantage of the opportunities when they arise. We're in a great position to reinvest in our operations and fund our industry-leading dividend, which currently stands at $2 per share on an annualized basis. Given the strength of our balance sheet, positive fundamentals underlying our industry, and the health of our home building operations, I am optimistic about the future of MDC. Now I'd like to turn the call over to David, who will provide more detail on our home building operations this quarter.