Greetings, and welcome to the Century Communities Fourth Quarter and Full Year 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, Mr. Scott Dixon. Thank you, you may begin.

Good afternoon, we would like to thank you for joining us today for Century Communities Fourth Quarter and Full year 2017 Earnings Conference Call. 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 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 will turn the call over to Dale.

Thank you, Scott. Today on the call, I will review our operating highlights and business updates. Rob will then discuss our homebuilding markets. Afterwards, Dave will follow up with further details on our financial results, balance sheet and 2018 outlook. Following our prepared remarks, we will open the lines for questions. 2017 was an exciting year of significant growth for Century Communities. We achieved record levels of net new home contracts, revenue, deliveries and backlog and accomplished this, while maintaining stable gross margin performance within an environment of increasing costs. We executed our strategy of dynamic growth through both strong performance in our legacy operations as well as the acquisitions of UCP and Sundquist Homes in the second half of the year, which further expanded and diversified our geographic footprint into a variety of additional attractive U.S. markets. As a result, we delivered our 15th consecutive year of profitable performance. Since 2012, we have expanded home sales revenue, operating income and adjusted EBITDA, each by a factor of over 11 times and our geographic presence has grown from one to 10 states. Our Number 1 ranked in annual revenue growth and is the 26th fastest growing company in The United States as recognized by Fortune Magazine, along with double-digit growth in earnings per share is reflected in the strong performance of our total returns over the past several years. Our business today has a variety of favorable underlying attributes, which did not exist when we began our transformation five years ago. Our dramatically expanded business and geographical scale has and does allow us to generate impressive year-over-year results as evidenced by our record growth in 2017. We have increasingly stable and predictable performance and better forward visibility as a result of our more established operations, and we have realized sustained…

Thank you Dale, and good afternoon everyone. We remain extremely optimistic on the homebuilding industry. Buyer confidence remains strong and higher FHA loan limits should allow new homebuyers to enter the market. To date, we haven’t seen a slowing in demand as a result of the recent interest rate increases. Our record fourth quarter operating performance was driven by significant growth in net new home contracts, deliveries, home sales revenues and backlog. We experienced good results throughout our diverse mix of products supported by strong market fundamentals and newly acquired assets. Fourth quarter net new home contracts grew 62% to 922 homes with organic growth accounting for approximately half of that increase led by our Texas and Southeast regions. We were encouraged that our absorption pace improved by 21%, which combined with more selling communities, allowed us to end the quarter with homes and backlog up 76% to 1,320 homes. This represented a backlog dollar value that was up 89% from the prior-year to $573 million. This significant increase in backlog homes and value positions us well for a continuation of strong results in earnings in 2018. We ended the year with land inventory in excess of 30,000 lots in many of the most robust U.S. homebuilding markets. We have demonstrated our ability to deploy capital at attractive returns and see many opportunities to replicate that success in both new and legacy markets. At quarter end, approximately 50% of our land was controlled, rather than owned, compared to less than a third as recently as 2015. We expect to continue sourcing additional land parcels with a similar weighting towards controlled land to accelerate our scale, while preserving our financial flexibility. Looking at our market portfolio, our increasingly diverse geographic footprint over 10 states provides us with balanced exposure to many…

Thank you, Rob. During the fourth quarter of 2017, we continued to successfully integrate our recent acquisitions, experienced strong operational performance and ended the quarter with a stronger balance sheet. Net income for the quarter was $17.2 million, while adjusted net income excluding one-time acquisition charges, purchase price accounting and the impact of the remeasurement of a deferred tax asset was $28.8 million or $1.01 per share compared to $15.1 million or $0.71 per share in the prior year quarter. Our full year net income was $50.3 million and adjusted net income was $71.1 million or $2.87 per share compared to $50.1 million or $2.36 per share in the prior year. Adjusted EBITDA in the fourth quarter of 2017 grew 90% to $58.6 million compared to $30.9 million in the prior year quarter. Adjusted EBITDA for the full year, was $150.5 million up 50% compared to $100.3 million in 2016. Home sales revenues for the fourth quarter increased 77% to a record $516.5 million compared to $292.4 million in the prior year quarter. This improvement in revenues was mainly driven by 62% increase in home deliveries to a company high 1,311 compared to 812 homes in the prior year quarter. Our average selling price was up 9% to $394,000 in the fourth quarter of 2017, reflecting favorable product mix and core price momentum, along with a positive impact, primarily from the acquisitions of UCP and Sundquist in the West. For the full year, we grew home sales revenues by 44% to $1.4 billion in home deliveries by 29% to 3,640 homes. Net new home contracts for the fourth quarter increased to 922 homes, an increase of 62% compared to 569 homes in the prior year quarter, mainly due to the addition of the new West region and stronger demand trends…

[Operator Instructions] Our first question comes from Michael Rehaut of JP Morgan. Please proceed with your question.

Hey, good afternoon. This is Neal Basumullick for Mike. I guess, I wanted to start on the wage, which has been very impressive, especially considering the investment. So I guess, can you update us on your expectations, how it – for the JV, how it may have changed? And I guess, more broadly what are they doing right? And then maybe if you could also update us on your entry into Phoenix?

In terms of our expectations, we’ve really experienced better growth there than we had anticipated and that’s what’s translated into the better financial results. But it’s such a different model than what we operate in the Century platform as well as virtually everybody else operates. And as we’ve talked about it before, all the sales activities are done out of retail centers. They don’t use model homes. It’s very much of an asset-light model. There is very little land on the balance sheet that doesn’t have a house under construction on it. And the combination of all of those things, along with the focus on the entry level and sub-entry level buyers really what has continue to drive success there.

Okay. That’s helpful. I guess, just on SG&A, you’ve been obviously, you been investing there. And UCP is still early stages, but you’re still running a bit above where you might want too. So I guess, given the uptick in revenues you’re expecting, when do you see leverage starting to kick in?

Yes, this is Dave. I think you will start seeing leverage kick in over the course of 2018 consistent with what we’ve kind of messaged in the past couple of quarters. There we’re still expecting synergies, $10 million or so from the UCP transaction. And as we said over the past couple of years, we’ve really built Century to be able to withstand a variety of states, a larger amount of revenue, so as I said as that came in, we’d really start to feel to leverage the SG&A platform. And I think that heading into 2018 and 2019, we start to see that leverage at the bottom line.

Okay. That’s great to hear. That’s all for me.

Thank you.

Our next question comes from Will Randow of Citi Group. Please proceed with your question.

Hey good afternoon and congratulations on the progress.

Thanks, good afternoon.

I guess, in terms of the strength in your absorption rates, do you feel like you’re pushing pricing aggressively enough? Or is it really a function of kind of fine-tuning, one, some of the acquisitions you guys have tucked in? And two, just improving the overall a precore business, if you will?

Yes. It’s always a balance in terms of that. And there’s there is absorption rates at different at subdivisions. But in general, we’ve seen very strong demand trends in all of our markets. We saw it really throughout the fourth quarter. And when we look at each month during the fourth quarter, it was pretty consistent. The year-over- year increase with what we experienced for the entire quarter being up 62%. When we look at so far this year, January has really stayed very strong. Looking at our January year-over-year sales, we are up 82%. And if we exclude the West and just look at our legacy regions, we were still up 55%, just in those regions. So across the board, we’ve seen our demand stayed very strong.

Okay. And I guess, you guys mentioned a pipeline of investments. I understand that’s probably most likely land investments or options. But I also perceive that you’re still hungry for more M&A at this point. Can you kind of characterize, how big a fish you’re willing to swallow? And regionally, kind of where you’re focused today?

Well, in terms of the size, let me back up. First of all, yes, we are still focused on looking for acquisitions that are accretive to the operation in the earnings. It’s been a cornerstone of the way we have grown to date, and it’s something that we intend to continue going forward. In terms of the size of it, it really depends on the opportunity and we’ve done transactions of varying sizes. We continue to look at transactions of varying sizes. And so without putting a size parameter on it, I just say, it’s something that has to make sense within the parameters of being accretive as well as making sure that our leverage stays in check. From a standpoint of geographic location, we very much are interested in continue to grow in all of our markets. All of our existing markets have very good underlying fundamentals. And so, we’re focused on growing there, both organically as well as looking at potential add-on acquisitions as we did with the Sundquist transaction up in Seattle. We’ve been pretty consistent in terms of where we have been looking. I mean, we’re very focused on the West. We are – when we look at the Southeast, we think there is a lot of opportunity there. One of the very large markets in terms of states that we are not in, except through our joint venture with Wade Jurney is in Florida. And so when we look at it, we think we have a lot of geographic opportunity to continue expand as well as the opportunity to organically expand in each of our markets.

Thanks for that and congratulations on the progress.

Thanks Will.

Our next question comes from Alex Rygiel of B. Riley FBR. Please proceed with your question.

Thanks and congratulations on another fantastic quarter.

Thank you.

Thank you, Alex.

First, on the macro side, are you hearing anything from your customers, your homebuyers saying anything about how to tax bill is motivating either their purchase or their avoidance?

No, not really. It’s – there’s been – a fair amount that has transpired over the last couple of months, when you look at the change in the tax legislation and then you look at the upward tick that’s occurred in interest rates and so it’s something that we monitor closely. And as indicated by our sales in January, we’re not seeing any adverse impact from either one of those today.

And as it relates to some more specifics on numbers, directionally, can you talk a little bit about gross margins in 2018 and SG&A as a percentage of revenue in 2018? And maybe some of the goals you want to achieve throughout the year?

Yes. It’s as we look at our businesses where we were underwriting what we see in the markets today, we don’t think it will be too dissimilar than what we’ve been experiencing in the past several quarters. From an SG&A perspective, as I just mentioned to – earlier on the call, we expect SG&A that it really start to improve throughout the course of 2018 and 2019. And now in terms of certain size and scale from a market delivery revenue standpoint, we think that we can really start to make some progress on our leverage from that side of the platform.

And last question. What was your capture rate on your financing business in the quarter?

It’s pretty still, pretty minimal given that we are just finishing rolling out to – rolling out loan officers and the operations to all of our market. For example, we rolled out people to the West Coast, but didn’t have any loans, as they are primarily to-be-built model that we move into production in 2018. As we go after the course of 2018, you’ll rate to start to move up. So as by the end of the year, we should be at a somewhat of a run rate number. I’ll update you as we go.

Thank you, very much.

Our next question comes from Jay McCanless of Wedbush Securities. Please proceed with your question.

Hey good afternoon guys. Great quarter. The first question I had, on the community count growth, a little bit higher than what we were looking for. Can you talk about how that’s going to rollout? Is it going to be pretty steady? Or is it going to be back half weighted? How should we think about that?

It’s really going to depend on how we – how soon we close out some of the other communities. It’s a net number, obviously. But I think that as we’re all being new communities, it will be somewhat ratable throughout the course of 2018.

And congratulations also on Wade Jurney, that investment continues to pay off. Is there any – can you give us any color since it is becoming a more meaningful part of the earnings stream, what you guys are expecting internally for 2018? And how we should think about the profits there?

Right now we’re not providing any kind of guidance on our investment there. But we continue to expect it to experience great returns throughout the course of the year.

And then the last question I had, what should we be modeling one-time cost related to Sundquist and UCP for say, the first half of 2018? And also, in terms of purchase accounting impact on the gross margin, any help there would be appreciated.

Yes, I think, in the fourth quarter, we had about $9.3 million of purchase price accounting rolled through in Q4. We expect roughly a similar number over the course of the next quarters in 2018. And then in terms of one-time expenditures, such as like acquisition cost, we think the majority of that is rolled through. We will still have transition costs and integration costs rolling through, but right now we’re comfortable which is the purchase price accounting.

Okay, that’s sounds great. Thanks for taking my questions.

You’re welcome. Thanks.

The next question comes from Alex Barron of Housing Research Center. Please proceed with your question.

Yes. Thanks. I think I missed your comments on the January orders, so can you repeat it, that would be appreciated. And also, you mentioned that the interest rates, I guess, to date haven’t impacted demand. Is it your sense that any of these people are just rushing to buy before rates go higher? And if anything, if rates were just being at these levels or go higher, how do you anticipate the customers would adapt to that?

So Alex, let me answer your second question first, and that is, do we see people coming off the sidelines because of concern about rising rates? And the answer is, no. We’ve not really seen that or heard that out in the sales office. Now, is there some of that? I’m sure, there is, but that doesn’t seem to be a motivating factor. In terms of the numbers that I provided earlier in terms of January, year-over-year, the entire portfolio was up 82% in terms of net sales. If we exclude the West region, since we didn’t have that in January of last year, the balance of the company was still up 55% year-over-year in January.

Okay. Great. Thanks a lot.

You’re welcome.

Our next question comes from Nishu Sood of Deutsche Bank. Please proceed with your question.

Thank you. On the 4,500, 5,000 closings in 2018, just wanted to get a sense of, obviously a tremendous sales pace even if you look at it on an organic basis recently. So as we think about that closings guidance, what kind of absorption pace are you kind of anticipating here? How much of that might be from some accelerated closing of the backlog as you integrate acquisitions? So how should we think about those two components in driving the closing slots [ph]?

Yes. This is Dave. I don’t know that we’re going to necessarily drive our absorption rates significantly higher than where they are today. If you take the midpoint of both our community count and our guidance range, I call it, absorption pace of roughly 2.8, 2.9 per community. And so when you look at that, we’re comfortable with where that is. Today, I think as we look at each community, each division, each region and whether we’re pushing price or pace, we’re comfortable with those numbers.

Got it, got it. Okay. And the communities that you’re adding this year, how much of that in UCP, obviously, that you’ve talked previously about how there’s going to be some maybe some maybe some delays in bringing those communities out of that portfolio online. So as we think about your community growth next year, is it mostly from your legacy portfolios? Or will there be an incremental contribution from some of the more recent acquisitions like UCP in that number?

It’s really the additional community count is going to come across the board. When we look at the West, which is all former UCP, some of that is coming from their existing legacy communities that, now there is the capital to develop those and bringing those online, we’ve purchased some additional land positions that will be opening in 2018 and that’s pretty consistent across the portfolio. So when we look at it, it’s not concentrated in any one region. And so we really expect all of our regions are going to be contributing in that area.

Got it. And final one on the lower tax rates, obviously, meaningful cash flow benefit from that. Leverage, I mean, is that reducing the leverage, new acquisitions, accelerated land investment, where is that going to end up?

I think, first and foremost, we still view ourselves as a growth company. And we were able to bring our leverage down in the fourth quarter where it was at the end of the third quarter after the UCP acquisition closed. So when we look at it, we’re still very much focused on investing in our business, growing in each of our markets, and potentially, if we find the right opportunities, growing in new markets.

Okay, great. Thank you very much.

Welcome. Thanks.

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back 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.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.