Greetings and welcome to the Century Communities Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Kolstoe, VP of Finance. Thank you. You may now begin.

Good afternoon. We would like to thank you for joining us today for Century Communities second quarter 2016 earnings conference call. After the market closed today, we distributed a press release detailing our second quarter financial results, which can be found in the Investor Relations section of our website at www.centurycommunities.com. 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. The Company undertakes no duty to update any forward-looking statements that are made during the course of 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 Francescon, Chairman and Co-Chief Executive Officer; Rob Francescon, Co-Chief Executive Officer, and David Messenger, Chief Financial Officer. With that, I'll turn the call over to Dale.

Thank you, John. Today on the call, I will review our operating highlights. Rob will then discuss our homebuilding markets. Afterwards, Dave will follow-up with further details on our financial results and balance sheet. Following our prepared remarks, we will open the lines for questions. During the quarter we increased earnings 34% to $0.62 per share compared to $0.46 in the prior year quarter. We achieved this by opening new and attractive communities, growing revenue, and carefully managing cost to enhance profitability. Home deliveries increased 21% to 768 homes and home sales revenues improved 38% to $257.2 million. In fact, we were able to increase deliveries and revenues in each of our regions. The overall homebuilding environment remains healthy supporting positive pricing in most of our markets, with our average selling price up 14% reflecting favorable product mix in core pricing menu. We are pleased with this collective progress and the balanced contribution to success from all of our major markets during the quarter. Our growth in deliveries and revenue allowed us to grow adjusted gross margin by 36% to $54.3 million. This improvement reflects our efforts to carefully balance our focus on growth, while maintaining a sharp eye on margins and costs in order to maximize profits and shareholder returns. That said, our reported adjusted gross margin percentage was slightly lower year-over-year due to geographical and product mix. Excluding the mix impact, the strength of our multimarket approach and diversified footprint are fostering more margin stability for Century. In addition to geography, we also work to diversify our business by product type and price point. The first time buyer segment in particular is showing signs of immense opportunity as homebuilding markets continue to recover. We are maintaining a wide target market for growth, while also diversifying across additional buyer segments, product types, and price points to deliver consistent growth. These steps are creating a stronger foundation for our business as we continue to make substantial progress towards our goal of building Century into a premier homebuilder. Looking forward, the macro environment is favorable in most of our markets and the long-term trajectory for housing improvement is encouraging. The continuation of our growth is well underway for 2016 with a strong pipeline of communities, a deep land portfolio, and ample capital resources to further increase our base of activity in a disciplined manner. We are pleased to enter the second half of 2016 with an outlook for continued growth in deliveries and revenue. We remain on path to grow our business and leverage our cost base to deliver another full year of expanded profits. I would now like to turn the call over to Rob to discuss our markets in greater detail.

Thank you, Dale, and good afternoon everyone. During the second quarter, we experienced an overall higher level of activity. We opened 10 new communities which helped us capture additional traffic in our neighborhoods. The number of new home orders rose 21% to 869 homes with growth in every region and Nevada nearly doubling. Even with the 21% improvement in deliveries and 38% revenue growth, our backlog continued to expand. We ended the quarter with a deep backlog of 1,070 homes with a dollar value of $407 million. This represents an increase of 6.5% and 16.9% respectively. ASP and backlog improved by 9.8% over the same period with prices moving higher in nearly each market reflecting the success of our new communities and product offerings. We continue to strengthen positions in current markets by sourcing additional land parcels that meet our disciplined underwriting requirements. In the second quarter, we acquired 542 lots for $21.6 million. During the quarter, we entered the very attractive Salt Lake City market and currently own or control over 500 lots. We ended the quarter with an inventory of 14,043 owned and controlled lots which provides us with a visible pipeline of organic growth for many years to come. Looking specifically at our individual markets, our momentum was very encouraging with net new contracts, home deliveries, and prices improving in nearly every served market. In Colorado, our home deliveries rose 17.6% with our average selling price up 10.7% compared to the year ago quarter. Demand remains firm with our backlog up 8.5% on units and 10.5% in dollar volume at the end of the second quarter. New home supply remains just over one month supporting continued positive pricing. The employment growth rate remains steady at 2.6% during the last 12 months with an increasing number of job…

Thank you, Rob. During the second quarter, we had a lot of success with our business initiatives to produce a 34% increase in net income to $13.1 million or 62% per share compared to $9.8 million or $0.46 per share in the prior year quarter. For the second quarter, our pre-tax income was $19.1 million, an increase of 32% year-over-year. Our second quarter earnings included a favorable tax benefit of approximately $610,000 or $0.03 per share. We expect a 34% to 35% tax rate to be more consistent with our longer-term expectations. Adjusted EBITDA performance was impressive growing 34% to $25.5 million compared to $99 million in the prior year quarter. Home sales revenues for the second quarter were $257.2 million, an increase of 38% compared to $186.8 million in the prior year quarter. This improvement in revenues was mainly driven by 21% increase in home deliveries to 768 and higher average selling prices which increased to $334,900 in the second quarter of 2016 compared to $293,700 in the prior year quarter largely due to a favorable shift in regional and product mix from our communities. Gross margin percentage on homes closed in the second quarter decreased 40 basis points to 19.2% compared to 19.6% in the prior year quarter. Excluding capitalized interest and purchase accounting impacts from cost of sales, our adjusted gross margin percentage in the quarter decreased slightly to 21.1% versus 21.3% in the prior year quarter. We were pleased with this essentially flattish adjusted gross margin result given the geographical and product mix of homes closed in the quarter. SG&A as a percentage of home sales revenue was flat at 12.2% compared to the prior year quarter. We will continue to review our processes and cost structures to gain additional leverage on SG&A as we progress…

Thank you, ladies and gentlemen. We will now be conducing our question-and-answer session. [Operator Instructions]. Our first question comes from the line of Michael Rehaut from JPMorgan. Please go ahead.

Thanks. Good afternoon and nice quarter.

Thanks Mike.

The first question I was hoping to get a little more kind of granularity in some of the regions as you mentioned you had positive order growth across your regions. I was hoping actually to focus in on Houston and Nevada looks like Colorado is pretty steady state and continuation here but obviously you had nice improvement in both seems like mostly driven effectively by the community count, but still a nice level of success in building of the business. So how do you think about this two markets and I also noticed Houston the sales pace was up a little bit year-over-year which is encouraging?

So starting first, Mike in Las Vegas and Nevada, part of it that you just picked up on is our community count did increase there. But our net new contracts year-over-year were up about 80% and the market is still strong in Las Vegas, we are getting good margins out of that market and good velocity and it's continued in the summer, which seasonally with the heat there can slow down, but it's actually played out very well to-date from a net sales standpoint. So we're pretty optimistic right now on the Vegas market. Regarding Houston, that's a market that we've talked about now for several quarters. It represents right around 3% of our balance sheet. So it's a very small investment we have in that market. Basically what we've been doing in the Houston market is going down to a lower price point and adjusting our product and looking at lot positions to achieve that. And that would be the sub 250 price point, some cases sub 200 even and so that's what we are moving to in that market. The market though in Houston even though John Burns just upgraded it from very cold to cold which is a good sign, it's still a challenge market especially at the higher price points but it is a much better market at the lower price points which we are gravitating towards.

I appreciate that. And I guess just secondly it seems like you reiterated or slightly raised some of your guidance in different components. Just had to think about the gross margins in particular obviously a little bit of a sequential decline, little more moderate year-over-year decline but I think in general we have been thinking about post interest kind of around at 20% for the full -- for certainly 2Q and in the back half, how should we think about that Dave and may be as you look in the backlog and the mix perhaps thoughts around 2017 as well?

2017 is a little far away for me to have any kind of crystal ball for you at the moment but as we look at our backlog as we look at 2015 the first half of 2016 then absent cap interest, we have been holding pretty constant about 21.5% on adjusted gross margin basis. When we look at the backlog what we have today absent typical product mix, we think that should be a pretty good number rolling into Q3 and Q4.

Thank you. Our next question comes from the line of Nishu Sood from Deutsche Bank. Please go ahead.

Hi this is actually Tim on for Nishu. Thanks for taking the question. I guess my first question; I'm going to follow-on the gross margin trend that Mike started. Just trying to kind of dig down a bit into the commentary because I know in the commentary it said that ASP increases were due to product mix and geographical mix and then as well the similar commentary for the rationale behind the gross margin falling. I was just trying to pretty much figure out what was the like-for-like pricing that you saw on a sequential basis from year-for-year and really kind of if that means that the newer communities that you're opening have may be slightly higher ASPs but lower margins. Just trying to put some numbers quantify about that?

All right. Tim, this is Dave. I think that's a fair assessment, as we're opening up some communities now, they are having higher price points; they are having higher ASP in them. As you can see our ASP is increasing but at the same time they may be having some lower gross margin associated with them. But yet across the portfolio we think that we have been able to achieve a 21.5% adjusted gross margin on a pretty consistent basis. I will let Dale follow-up here.

Part of it is some of the aggregation of the homes that are closed in a particular quarter are going to change but when we look at the portfolio as a whole and we look at what we have in backlog in communities that we have that have recently opened and they are going to open, we really see nothing that are -- it is appreciably different in those communities than in the communities we typically have. So when we look at that, we have had some year-over-year growth in pricing and some of its product and it's hard to split out exactly what's what, when we look at the aggregation. But in general going forward there is nothing that we see in our business that is appreciably different than what we had experienced in the past.

Understood, so that sounds like it might be a slightly temporary. All right, great thanks for that. And then my second question is around the SG&A leverage, so with community count roughly flat year-over-year and obviously you are -- you did open 10 new communities and you did raise the guidance for community growth at year-end but just trying to dig a bit down into where is the SG&A leverage with top-line growth of 38% year-over-year and can -- are you able to quantify that as well may be saying ex the additional investment we would have gained some certain amount of leverage or is it kind of something we can kind of flat line here. I know you are being a bit cautious from the leverage standpoint but hoping to get your input there?

I think from the SG&A leverage standpoint, we are pleased that SG&A we bought it down from the first quarter 39% to 12.2% as we had indicated we would. The trend is consistent with our prior year as we discussed on previous calls and our first quarter will be the highest. And then you see us achieve leverage throughout the balance of the year and I think as we sit here today August 2, there is no reason to think that we shouldn't be able to achieve additional leverage going into Q3 and Q4.

Thank you. Our next question comes from the line of Patrick Kealey from FBR Capital Markets. Please go ahead.

So just wanted to get your thoughts and I think you touched on absorptions here and really the nice year-over-year improvement here across the company and driven obviously by a few segments. But when we're thinking about kind of the pace versus price give and take obviously within the model, where ultimately do you think you will feel comfortable across the company on kind of an overall pace kind of run rate. I guess is it a three do you feel like may be it could run a bit higher due to the first time product in Atlanta. But obviously with the pricing you have seen thus far and what's in backlog, you have been getting solid pricing, I guess just trying to think trying to I guess size the opportunity for further price growth versus what you reported this quarter?

In terms of price growth, it's really down to community level. And in some communities we have more pricing power than others obviously. But when we look at it we haven't had to do a tremendous amount of balancing between price versus pace. And when we look at what we projected on our internal numbers both in terms of absorptions as well as price, we have been achieving them. So we haven't had to pull a lot of different levers to get to the stage that we have.

Okay, great. And then kind of just thinking again about kind of the opportunities for regional growth whether it would be organically with land or inorganically through another platform. Would love to get your thoughts on may be what you are seeing when it comes to private builders out there and may be if you want to think about folders that just have come across your desk may be how that compares to last year and obviously you have talked about that continuing to be a part of your growth story just trying to sensitize may be how you feel that market shaping up and as we kind of think about your ultimate portfolio moving forward?

It still remains a big part of what our plans are. We haven't been able to isolate a transaction that has risen to a level that we think it makes sense to move forward on. It's not from lack of looking at opportunities but we haven't seen any opportunities where all the ingredients have come together and those ingredients for us are the market, the people that are operating the business, the product, and the positioning of that company and an important component is the pricing expectations of the seller. So when we look at that, we are still seeking out those alternatives but we still have a lot of options within our existing markets in terms of attractive investment opportunities in new land deals as well as for example our expansion into Salt Lake City which we're very pleased with how that's starting out and we have done it with very little in terms of overhead cost that we have had to incur and it's something that as we look forward into the future, we are very pleased with what's happened in the past and we are very positive on what we think is going to continue to occur. So I guess that's a longwinded way of saying that we just haven't seen the opportunities in the M&A market. We intend to continue to looking at it, but that's not stopping us from being able to grow our business.

Thank you. [Operator Instructions]. Our next question comes from the line of Alex Barron from Housing Research Center. Please go ahead.

Thanks and good job guys.

Thanks, Alex.

I was hoping we could focus on Colorado for a minute. And so your orders were up 1% this quarter and as I look at back half of last year it looks like there was a sharp drop-off, can you kind of remind us what that -- what happened back then and I guess to some extent what you guys expect to happen in this back half would we see a similar drop-off or would it be kind of growth off of that base from last year?

No, what we saw last year was really something temporary nothing that is structural in what we're seeing in the market. The market remains very strong as we have a large presence here. And so we see nothing either in the market or a business that would give us any concern on the go-forward basis.

So you wouldn't expect to see a similar drop-off then?

No.

Okay, good. And then I guess on your guidance regarding communities, I think you guys said you had 91 communities this quarter and you're guiding to 85 to 90. I know that's a bump up from last quarter's guidance but why would the community count go down from here, are you expecting to sell out faster than you can replace them or is there anyone region that would go down from here, can you just elaborate on that?

Alex it's David. It will just become a timing issue at the end of the year in terms of what we get open in the third and fourth quarter versus what closes out. We think that between today and December 31, we will open and close roughly the same number of communities and really just it comes down to timing in terms of which ones have opened and which ones officially close out at the end of the year. There is nothing -- nothing significant going on in the markets that would be a drop-off.

Okay. All right. It sounds good. I will get back in the queue. Thanks.

Okay. Thanks, Alex.

Thank you. Our next question is a follow-up from the line of Michael Rehaut from JPMorgan. Please go ahead.

Thanks. So just wanted to hit also on kind of organic growth versus M&A and obviously it's a good thing to say disciplined if you know find things that hit your hurdles. But when you look at from an organic standpoint, your average community count or generally speaking your community count has been flattish now for about four quarters and kind of with some timing adjustments that appears that it will continue to be that for broadly speaking for the rest of the year, so from an organic standpoint, obviously you are not sitting still there. You are not waiting for the next deal. Any initial thoughts around community count growth for 2017 obviously it's I understand you want to give out full guidance but just thoughts around at least from a community count standpoint, what's in the pipeline?

Well we have actually year-over-year, we have increased our community count by 10 communities. And when we look at what we have in front of us in terms of land positions and anticipated openings, I mean we believe that from an organic standpoint that we can continue to growing and that we will continue growing on a year-over-year basis. So I mean, as you mentioned, I mean we're not just because we haven't found any M&A opportunities that we think make sense we've been spending more time into energy and investment on organic growth.

Understood. I guess what I'm coming from is at least since let's say 3Q 2015 the community count has been fairly steady, the lots under -- total lots under control has gone up a little bit, it's still obviously a very large lot position relative to your LTM closings. So again I guess -- again perhaps it's all premature but just trying to get a sense of on an organic basis, thinking about next year, is it low, mid, high-single-digits types of community count growth. Any thoughts on that would be helpful?

Hey, Mike, it's Dave. We just started kind of 2017 and 2018 business plan process. We will have a better number for you later in the year. Right now we just don't have in our visibility to give you any kind of reasonable growth assumption for community count in 2017.

Okay. Is it fair to say that we should expect some level of growth or --?

Yes.

Thank you. Our next question is a follow-up from the line of Alex Barron from Housing Research Center. Please go ahead.

Thanks guys. If we can focus on SG&A for a minute, so this quarter the SG&A was up 38% in dollars pretty much in line with 37% in dollars and revenues. As we look into the back half, I know you guys indicated there will be leverage I think relative to this quarter is how I understood it. But you guys -- is there anything that was one-time in nature in this quarter or is it just more cost associated with opening communities or I'm just trying to get a feel for whether the operating margins might be similar to last year because last year seems you guys had pretty good leverage in the back half. I'm just trying to see what you guys are expecting for the second half?

Yes, Alex, this is Dave. In the first half of the year there is definitely more impacts we made into operations from a G&A standpoint. And that as those, you start to monetize that the higher revenue and higher closings come in that's where we get to pick up a fair amount of the leverage.

Okay. So you would expect then the just from the higher revenues to -- for that to come out in the second half then?

Yes.

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to Dale Francescon for closing comments.

Thank you, operator, and thank you again to everyone for joining us today. We look forward to speaking with you again next quarter.

Thank you, ladies and gentlemen. This does conclude the teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.