Good day, everyone and welcome to the Century Communities First Quarter 2023 Earnings Conference Call. I would now like to turn the conference over to Tyler Langton, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon. Thank you for joining us today for Century Communities earnings conference call for the first quarter 2023. Before the call begins, I would like to remind everyone that certain statements made during this call may constitute forward-looking statements. These statements are based on management's current expectations 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 in the heading Risk Factors in the company's latest 10-K, as supplemented by our latest 10-Q and other SEC filings. We undertake no duty to update our forward-looking statements. 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. Hosting the call today are Dale Francescon, Chairman and Co-Chief Executive Officer; Rob Francescon, Co-Chief Executive Officer and President; and David Messenger, Chief Financial Officer. Following today's prepared remarks, we'll open the line-up for questions. With that, I'll turn the call over to Dale.

Thank you, Tyler and good afternoon, everyone. We are pleased with our solid first quarter results, including $44 million in pre-tax income, net income of $33 million; diluted earnings per share of $1.04 and EBITDA of $55 million. We successfully achieved the objectives discussed on our year-end conference call as we continue to focus our sales efforts and incentives on monetizing homes with near-term deliveries despite their lower margins resulting from inflated direct construction costs given their start dates in 2022. During the quarter, we also significantly increased our new home starts, generated $191 million in operating cash flow and further reduced our net debt-to-capital ratio to 21.5%. We have become increasingly encouraged by the pickup in our sales activity over the past several months. Net new contracts in the first quarter totaled 2,022 homes with sequential increases in both February and March and a 61% improvement from fourth quarter 2022 levels. Given the solid demand we saw in the quarter, we believe that we could have sold even more homes if our inventory of near-term deliveries had been higher. Our quarter-end backlog consisted of 1,920 sold homes valued at $714 million. Underlying demand for new homes remains favorable, given positive demographics and the scarcity of existing homes on the market. So interest rate volatility and overall economic uncertainty continue to impact the U.S. consumer. As we have seen over the past several quarters, home buyers are continuing to look for homes that are closer to completion in order to lock in their interest rates. Consistent with our strategy, we intend to continue concentrating our sales efforts on homes with more near-term completions. In terms of sales patterns, we expect more typical seasonality to return this year after being obscured by the COVID-driven sales boom that began in 2020 and continued until the interest rate-led downturn in the second half of 2022. As a result, we would expect our sales to see the usual spring selling season uptick, slowdown during the summer and then pick up in the fall before trailing off at the end of the year. In the first quarter, we delivered 1,912 homes, a level which was ahead of our expectations heading into the quarter. These better-than-expected deliveries were mostly due to timing as deliveries originally expected for the second quarter ended up closing in the first quarter. As a result, we expect our deliveries in the second quarter to be slightly below first quarter levels. As a reminder, on our fourth quarter and year-end 2022 conference call, we guided to deliveries in the first and second quarters of 2023 being below prior year levels due to the fact that we delayed surety openings and started fewer homes in the second half of 2022 as the market deteriorated. In order for you to better understand how our starts pace in 2022 impacts our deliveries in 2023, we think it's helpful to discuss our starts cadence for the last 5 quarters. We started 3,246 homes in the first quarter of 2022, followed by 3,469 homes in the second quarter. As interest rates started to rapidly rise in the second half of 2022 and the housing market softened, we reduced our starts to 1,765 homes in the third quarter and only 970 homes in the fourth quarter of 2022. Given this cadence of starts, we simply have fewer homes available for delivery in the first 2 quarters of 2023. Over the past several months, as the margins on homes we were starting began to see healthy gains and sales activity started to rebound, we began to increase our starts resulting in a total of 2,354 home starts in the first quarter of 2023. We expect our starts in the second quarter of 2023 to be higher than the first quarter. As a result, we anticipate seeing sequential improvement in our home deliveries in both the third and fourth quarters. Revenues from home sales were $736 million in the first quarter. Our average sales price decreased by 9% on a year-over-year basis to $385,000, reflecting our strategy of properly incentivizing homes with near-term deliveries and building more affordably priced homes. In the first quarter, our Century Complete business had strong results. Deliveries and revenues were up 12% and 17%, respectively, on a year-over-year basis, with an average sales price of $253,000. Our Century Complete business accounted for 38% of total deliveries in the first quarter of 2023 compared to 28% of our deliveries in the year ago period. We are continuing to see strong underlying demand for affordable entry-level homes. This lower-priced segment of the market is benefiting from favorable demographics and has the widest range of potential homebuyers. As a reminder, this portion of our business only purchases finished lots on a just-in-time basis. We believe we have the right strategy that positions us well as home sales rebound and our margins improve off of trough levels. Buyers are currently looking for affordably priced homes with near-term completions that we intend to meet this demand. We have been ramping our starts and new community openings over the past several months, given our confidence that the homes we are starting now should carry higher margins and returns. As a result, our deliveries in the second half should exceed first half levels and our second half gross margins should exceed first half margins due to lower direct costs, improved cycle times, and reduced levels of incentives. In closing, I want to highlight that Century was recently named to Newsweek's list of America's most trustworthy companies 2023 and is the highest ranked homebuilder on the list. Our cornerstone goal has always been to deliver a home for every dream and this recognition is a reflection of how much our employees and trade partners strive each and every day to fulfill that mission. On behalf of the entire senior management team, I want to thank all of our team members who are critical to our success as a company. And through our Century University training programs, we are committed to providing them with ongoing training and development so that we can continually raise the bar for what the home buying experience should be. I'll now turn the call over to Rob to discuss our business and plans going forward in more detail.

Thank you, Dale and good afternoon, everyone. We have a strong presence within the affordable new home category with approximately 90% of first quarter deliveries coming from homes priced below FHA limits, allowing us to target the widest range of potential buyers in any given market. Our homebuyers continue to have a healthy financial profile with Century Communities and Century Complete homebuyers having respective average FICO scores of 729 and 713 in the quarter. We believe that we are well positioned as conditions in the housing market normalize given our spec-based model and focus on entry-level homes. Our cancellation rate was 18% in the first quarter, a significant reduction from the 37% rate we saw in the fourth quarter of 2022 as buyers are adjusting to the higher interest rate environment. For comparison purposes, our cancellation rate was typically in the 20% range in the years prior to COVID. While the homebuilding industry continues to be challenged by municipal and utility delays, supply chain issues, and trade shortages, these pressures are continuing to slowly ease. As a result, we are seeing improvements in our cycle times and expect the cycle times of homes that started in the fourth quarter of 2022 and first quarter of 2023 to be significantly better than the cycle times of homes that were started earlier in 2022. Additionally, as supply chain delays and trade shortages further subside, our cycle times will decline further in the quarters ahead, such that this year, we expect to be starting and completing homes at a more traditional 4 to 6 month time period. In the first quarter of 2023, the direct construction costs on our starts declined by roughly 11%, an average of approximately $20,000 per home versus the high watermark in the second quarter of 2022. We have seen a reduction in our costs across a range of products to varying degrees. While the amount of additional cost savings on our start should moderate as the year progresses, we should see incremental benefits to our gross margins in the second half of the year as we start delivering these lower-cost homes. In the first quarter, we generated adjusted gross margins of 19.6%, which was in line with the expectations we provided last quarter for our margins to be consistent with fourth quarter levels. Similar to last quarter, our first quarter margins were impacted by the fact that the homes delivered were burdened with elevated construction costs given their start dates in 2022 as well as higher incentives than historical norms as we prioritize the sale of complete and completing inventory. We currently expect our gross margins in the second quarter to be similar with first quarter levels as we continue to deliver homes started at the time in 2022 when our direct costs were at or near peak levels. The homes that we have been starting over the past several months are carrying a higher margin profile due to improvements in direct construction costs, reduced incentives, and shorter cycle times. As a result, we expect our homebuilding gross margins to trend positively on a sequential basis in both the third and fourth quarters. We ended the first quarter with approximately 52,000 owned and controlled lots with roughly 61% owned and 39% controlled. This total lot pipeline was roughly flat with fourth quarter 2022 levels of 53,000 lots and our 31,000 owned lots provide approximately 3 years of deliveries based on 2022 volumes, which is consistent with past years. As we have stated previously, our land strategy allows us to control a significant amount of land for future growth during periods of high sales absorptions for limited investment and exit those positions at a reasonable cost in the event of a market downturn, all without adversely impacting our near-term need for lots on which to start homes. Looking forward, we don't expect any further significant decreases in our controlled lots and our controlled lot count increased modestly in March compared to February levels as we started to slowly and conservatively increase our land acquisition efforts. In the first quarter, our community count increased to a company record 234 communities, up 13% from the fourth quarter 2022 levels of 208 and 19% from year ago levels of $1.97. While our community count saw year-over-year increases across all segments in the first quarter, we saw the greatest growth in Texas and the Southeast, two markets that have generally held up better during the recent slowdown given their relative affordability, strong employment, and population growth. We intend to continue to grow our community count as the recent declines in direct costs, moderation of incentives, and inspected improvements in cycle times has given us increased confidence in our ability to generate solid margins and returns from the new communities. Given the extent of our existing land pipeline, our year-end 2023 community count could be in the range of 250 to 260 communities if we elect to open all communities that we expect to be available representing year-over-year growth of 20% to 25%. We are pleased with our performance this quarter and encouraged by the improvement in sales activity that we have seen since the start of the year. Looking forward, we are confident that our existing land pipeline will support strong community count growth this year and increased deliveries in the years ahead. I will now turn the call over to Dave to discuss our financial results in more detail.

Thank you, Rob. We generated strong operating cash flow this quarter and further reduced our net homebuilding debt ratio while also increasing our starts and community count to drive future growth. During the first quarter of 2023, pre-tax income was $44 million and net income was $33.3 million or $1.04 per diluted share. Home sales revenues for the first quarter were $735.6 million compared to $988.4 million in the prior year quarter. Home deliveries of 1,912 homes declined by 19% on a year-over-year basis, a direct impact from our decision to start fewer homes in the second half of 2022. Our average sales price of $385,000 declined by 9% versus the prior year quarter, reflecting our strategy of properly incentivizing homes with near-term deliveries, building more affordably priced homes and Century Complete accounting for a greater percentage of our deliveries. In the first quarter, net new contracts across our footprint were 2022. The year-over-year decline in the quarter was primarily due to the reduced number of homes we had available for sale and the impact that mortgage rate volatility and economic uncertainty had on potential homebuyers. At quarter end, our backlog of sold homes was 1,920 valued at $714 million, with an average price that had decreased by 10% year-over-year. In the first quarter, adjusted homebuilding gross margin percentage was 19.6% compared to 29.5% in the prior year quarter and 19.8% in the fourth quarter 2022. Homebuilding gross margin was 18.2% compared to 28.3% in the same period last year and 17.6% in the fourth quarter of 2022. Similar to last quarter, this year-over-year reduction in margin percentage was expected and primarily resulted from our strategy of generating cash and reducing our leverage profile by focusing our sales efforts and incentives on near-term deliveries, even though they carried elevated construction costs due to their start dates earlier in the year. Looking ahead, we expect our margins to increase sequentially beginning in the third quarter of this year and we did not book any impairments this quarter. SG&A as a percent of home sales revenue was 13.4% in the first quarter compared to 10.3% in the prior year. The largest driver of this year-over-year increase was the spreading of our fixed costs over a lower revenue base. During the first quarter, Financial Services captured 66% of the closings generating $15.9 million in revenues compared to $26.3 million in the prior year quarter, primarily due to fewer loan originations and increased competitive pressures. The business contributed $5.1 million in pretax income compared to $11.2 million in the prior year quarter. During the quarter, we increased our quarterly cash dividend by 15% to $0.23 per share from $0.20 per share and did not repurchase any shares of our common stock leaving approximately 1.5 million shares remaining available for repurchase under our current authorization. As a result of executing on our objectives, we generated $191.3 million in operating cash flow in the first quarter even with the significant increase in our home starts. Our net homebuilding debt to net capital ratio further declined to 21.5% compared to fourth quarter 2022 levels of 23.5%. Our homebuilding debt-to-capital ratio declined to 31.8% at quarter end compared to 32% as of the end of the fourth quarter of 2022. We ended the quarter with a strong financial position, including $2.2 billion in stockholders' equity, a 19% year-over-year increase and $1.2 billion in total liquidity, including $418.4 million in cash. At the end of the first quarter, we had no borrowings outstanding on our $800 million unsecured revolving credit facility that does not mature until April 2026. Additionally, we have no senior debt maturities until June of 2027, providing us ample flexibility with our leverage management. At quarter end, our inventories totaled $2.7 billion. Now, turning to guidance. We have become increasingly encouraged by the improvement in sales activity that we experienced in the first quarter and our ability to start more homes. As a result, for the full year 2023, we're increasing our guidance for home deliveries to be in the range of 7,250 to 8,250 homes and our home sales revenues to be in the range of $2.7 billion to $3.2 billion. As Dale mentioned in his remarks, our deliveries in the second quarter should be slightly below first quarter 2023 levels as we delivered a greater number of homes in the first quarter that were originally expected for the second quarter. Given our increased level of starts since the beginning of the year, we continue to expect our deliveries to increase sequentially in both the third and fourth quarters. In closing, we believe that our spec-based model, dedicated focus on more affordable homes, geographic footprint, and solid balance sheet positions us well as conditions in the housing market continue to improve. With that, I'll open the line for questions.

Thank you. We will now begin the question-and-answer session. Your first question comes from Carl Reichardt with BTIG.

I wanted to ask a bit about the lot count in particular. So the complete side is now, I think, about half of your controlled lots, they're down a lot year-on-year. Can you talk a little bit about the developers who are feeding you those finished lots since guessing you're not typically self-developing those? And how you're feeling about how they're capitalized now given some of the concerns about regional bank capital in particular for acquisition and development financing.

It's something we're heavily focused on, Carl, with the regional banks and all. This is something that's transpired fairly quickly. With that, we've had the developers continue to be able to feed us those lots, part that ones that already had the financing new deals that are coming up, that's kind of more of a challenge. We've been able to, at least to this point, overcome it, just not to get too granular but as an example, we have a lot committee every week at Century Complete on Thursdays. Tomorrow, they have the biggest amount for this entire year coming up for lot committee. It's a large number of lots that would be looked at for purchase. Again, these are all finished lots. And so we're still getting our share of lots. But definitely, the financing side, we're looking at that very closely on how that impacts the private developers.

Okay. That makes sense. And then along those lines, so what could we expect if the mix shifts substantially away from Century Complete? And obviously, from an orders perspective, it did relatively speaking, in terms of absorption this quarter. So as you look out, is your thought process on the guide for this year that you'll have a mix not dissimilar from Century Complete to what you've had in the past? Or will it grow? I just wanted to try to figure out the margin guide and the delivery guide based on that mix of Century Complete moves a bit.

Carl, we're really not expecting that there's going to be a big shift. Actually, the Century Complete side continues to grow. When we look at it, part of the reason when you look at the Century Complete sales is when we slowed down our land acquisition in the second half of last year, that impacted that part of the business more because they don't inventory lots. On the community side, we already own the land. So if we chose not to start it, it was in a situation where it was still on our books. On the Century Complete side, if we didn't start it, then we didn't buy the lots. So it took them a bit longer to start back up than it did on the community side.

The next question comes from Alex Rygiel with B. Riley.

Good evening and very nice quarter. Can you talk a bit about your product mix, geographic mix and overall direction for average selling prices over the coming quarters?

Yes. I think that if you look at our product mix, as Dale just talked about, we're still expecting Century Complete to be a growing part of our business as we expect the rest of the business to grow over the balance of this year. So the difference we have between completed counties, we expect to keep to stay there through the balance of this year. And ASP, we've seen kind of the height of where it could be. And we think that as we bring new product online and we have more new communities that we'll be opening up later this year. We're looking to be bringing on product that can be at a lower price point. So maybe not when those deals were originally approved to be developed and built, maybe we're not building the most expensive plans anymore, so we're trying to rotate down the ASP of the overall community which in turn will bring down our ASP across the portfolio.

That's helpful. And then can you talk a bit about some of the buyer characteristics that you're seeing? I know you went into a few of them there but maybe go a little bit deeper on the buyers today and the urgency they have and general age category and so on.

In general, a significant percentage of our buyers are first-time homebuyers. Many of them are transitioning from apartments or other non-ownership arrangements. This is why we have concentrated our efforts on selling near-term completions, as these buyers are heavily influenced by interest rates. We want to avoid keeping them in backlog for too long, and they prefer not to be in backlog either. They need to know their interest rate and payment details so they can close and move into their new homes. This has always been a characteristic of our buyers, but it is even more pronounced now due to the current interest rate environment. They want clarity about their payments before closing.

The next question comes from Jay McCanless with Wedbush Securities.

I guess the first question I had with what's in backlog at the end of the first quarter. I guess, is that backlog basically been price adjusted and that's why you're thinking gross margin is going to be flattish from 1Q to 2Q? Do you think there's any more work from an incentive or buy-down that you would need to do to bring some of that backlog to the closing table?

No. No, I think that that's all been taken into account. I think what we're seeing now is different than what we're seeing in the back half of last year where there were obviously different adjustments made at the closing table or getting right up to closing. When you look at it now, I don't think that that's necessarily something that we need to be doing and incentives that we have in those deals already, we've already taken into account in that guidance.

And what should we expect for SG&A in the second quarter, either dollar or percentage amount you're targeting?

Well, I think we're always targeting lower but I think that given that we're expecting closings to be down a little bit from Q1. I think our fixed costs have been running. I think all last year, we're hanging out just under 70% of our G&A numbers were fixed. And I think right now, in Q1, we're just a tick above about 71%. And my guess is that those fixed costs stay probably pretty consistent and we've held those pretty flat for 3, 4, 5 quarters now. And then the variable piece on commissions will be just dependent on what we do from a closing perspective.

So on that, we've heard, I think, from another builder today that maybe co-broker is starting to move up a little bit. Is that something that your buyers typically use? And if so, is that something we need to think about in the SG&A line through the rest of the year, especially as you're growing the community count?

Yes. Yes. We've definitely seen the external rails or the brokers come back into the fold and into the mix. So I would expect most of our markets have a pretty healthy co-broker percentage and we expect that to continue and see it increase as our deliveries go up throughout the rest of the year.

And then any commentary you could give us on April?

Yes. In terms of sales, what we experienced in the first quarter has continued into April.

As we said in our prepared remarks, we increased sequentially in sales as the quarter went on. February was higher than January and March was higher than February. When we look at where we stand today on April, we're above where we were at this time last year in April. So we've not seen any change with regard to the velocity out there in terms of interest of the home buyers.

The next question comes from Alan Ratner with Zelman & Associates.

First question, I guess, on the land side. On the land side, you mentioned flow deal flow is starting to pick up a little bit and there's more activity in the land committee. What are you seeing on land prices? I mean, if I look at your average closing price, it's down about 40,000 or so from the peak last year. I'm guessing lot prices have not reset as meaningfully but have you seen any pullback on lot prices at this point? And if not, I guess are you just assuming that the construction and labor cost relief you're seeing is enough to offset kind of similar lot prices?

Yes, Alan, in terms of land prices, we started seeing a little bit of relief last year. Certainly, on deal terms and structure, a lot of relief there. We started seeing some land price reductions. As the spring selling season has picked up here in '23. Other builders now are also in the market for land. People have kind of reinstituted looking at various deals. And so with that, we are not seeing the price drops in land that we had hoped to see when we were in the, let's say, fourth quarter of last year on what we thought we might have coming forward this year. So it's been pretty stable.

Got it. But I guess so on that note, do you're confident moving forward even at these, call it, peak land prices or close to it because of what you're seeing on the ground in terms of your ability to maybe pull back a little bit on incentives or kind of pricing firming up?

Yes, exactly. And also this product that we're putting in the communities as well and what we're offering, more efficient product, lower square footages, things like that, that can help make deals work. But yes, definitely, we're not anticipating right now. It'd be great if it happened but we're not anticipating land prices coming down.

Got it. That's helpful. I guess on a similar vein on the cost side for construction materials and thank you for giving those start figures because I think it really does help to conceptualize what's been going on and kind of in terms of not only your inventory availability but obviously, the cost relief that you and others have seen and the improvement in cycle times, it's not surprising, given that pullback in starts. I guess my question now is with you and others beginning to ramp, start back up again, how confident are you in holding on to these cost savings you've been able to realize? I mean, thinking back to last year when you were starting 3,000, 3,500 homes a quarter, that was a pretty tough environment from a labor and material standpoint. So if you get close to that number again or maybe even a little bit below it, is there a risk that some of this relief you found in the near term kind of reverses?

Yes, there is always some level of risk involved. However, we must consider the rapid rise in direct construction costs. They escalated quite quickly and reached significant heights. As prices have begun to decline from those highs, we do not anticipate that we will continue to achieve the same level of reductions moving forward. Nevertheless, many of the supply chain issues that contributed to the rising costs, not only due to the volume of homes being built but also as a result of COVID-related disruptions, are improving. This means we no longer face those challenges in the same way. As we plan to start more homes and expect our competitors to do the same, the overall supply chain situation is better than it was last year, regardless of the number of homes being constructed.

The next question comes from Michael Rehaut with JPMorgan.

This is Andrew Hassen on for Mike. I wanted to get a sense of if I can ask about pricing trends within the quarter. I'm not sure if you guys disclosed that but would love to get any color there.

I believe that overall, our incentives in the fourth quarter reached peak levels. As we noticed an increase in absorption and demand improving compared to the end of last year, we began to reduce our incentives. Consequently, from the start of the quarter to its end, our incentives decreased. Moving into April, this trend has continued. It's an ongoing process as we progress, but it is certainly influenced by the level of demand and the absorption rates we are experiencing.

And then, I believe you said that there was a $20,000 cost reduction from the peak. With lumber relatively stable. Can you split out maybe how much of those cost savings are maybe lumber versus other inputs?

Okay. It's a variety of inputs. It's everything from here plumbing and HVAC and flooring and labor, there's a variety of components that obviously go into it. So we've been seeing cost release across the board. A couple of areas, the concrete appliances, you're not seeing as much cost relief but the rest of our kind of our direct cost stack, we've been seeing reductions and improvements in.

Operator, are there any further questions? With that, we'll turn it back over to Dale for some closing remarks.

I'd like to take this opportunity to once again thank all of our team members for their incredible work and continued dedication to our valued homebuyers. I'd also like to thank our investors for their time today. We appreciate your continued support and investment and look forward to speaking to you again next quarter.