Welcome to the Landsea Homes Corporation third quarter 2022 earnings call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host, Drew Mackintosh of Mackintosh IR. Mr. Mackintosh, you may begin, sir. Good morning, and welcome to Landsea Homes third quarter 2022 earnings call. Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the federal securities laws. Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. These risks and uncertainties include, but are not limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Landsea Homes' website and in its SEC filings. Hosting the call today are John Ho, Landsea's Chief Executive Officer, Mike Forsum, President and Chief Operating Officer, and Chris Porter, Chief Financial Officer. With that, I'd like to turn the call over to John. Good morning, and thank you for joining us today as we go over our results for the third quarter of 2022, provide an update on our current business conditions, and give some insight into our company strategy going forward. Landsea Homes posted strong profitability in the third quarter. We delivered a record 543 homes during the quarter, with ASPs increasing 9% year-over-year to $601,000. This produced a 56% improvement in our top line, with revenue growing to $335.6 million. We also improved our home sales gross margin by 480 basis points, which all translated to net income of $20 million or $0.49 per diluted share, a 130% increase over the third quarter of 2021. I want to thank all our team members for producing such great results this quarter and for executing at a high level despite continued operational headwinds. I especially want to call attention to our Florida division, which did an excellent job of preparing for, managing through the impact of Hurricane Ian. In total, we had 38 deliveries in our Florida division, equating to $14.3 million in revenue that were pushed into the fourth quarter due to Hurricane Ian. Those homes have since closed, as our teams did an excellent job getting things back on track after the storm passed. We are extremely fortunate, all things considered, given the severity of the hurricane, as no employees sustained serious injury, and we were able to get our communities back up and running in a short amount of time. Even with these challenges, Florida still delivered 45% of our homes and 1/3 of our homebuilding revenue. Our strategy of expanding into strong growth markets continue to show results. Although we produced exceptional results this quarter, we, along with the rest of the homebuilding industry, continue to face headwinds. As has been widely reported, the recent run-up in mortgage rates has resulted in difficult sales environment for our industry. The higher financing costs deterred many new homebuyers from purchasing a new home during the third quarter and led several buyers in our backlog to reconsider their purchase. As a result, our net order results for the quarter were down 7% compared to the third quarter of last year, and our cancellation rate was 9% of our starting backlog. Mike will provide additional details shortly, but in response to the softer sales environment, we have also implemented several initiatives to spur sales activity and protect buyers in our backlog. We plan on staying competitive in the marketplace by being responsive to any changes in market conditions and addressing the consumers' needs. At the same time, we think it is important in this environment to stay focused on strengthening our balance sheet, generating cash, and increasing liquidity. This includes reevaluating all our land spend through 2023. In 2022, we estimate we'll spend roughly $450 million on land acquisition and development. As we move into 2023, assuming no changes to market conditions, we'll expect this to go down to roughly $400 million. With respect to our lot pipeline, we feel we are in a great position to navigate today's uncertain market, thanks to the asset-light nature of our land portfolio. With 57% of our lots controlled via option agreement, we have the ability to work with landowners to adjust pricing and takedown schedules to levels that reflect the more challenging market conditions. In addition, we purposely negotiated provisions in our option agreements that allow for extended lot takedown schedules so that we would be able to have additional flexibility during times like these. We plan on being disciplined with future lot takedowns and are prepared to walk away from deals that no longer make sense in today's market. In fact, our lots owned and controlled decreased 5% sequentially from 13,017 last quarter to 12,410 this quarter. Much of the land we do have on our books was underwritten between 2019 and 2021 and reflect home price assumptions that were much lower than today's levels. We feel good about the communities we are bringing to market in the coming quarters. Additionally, our acquisition of Hanover Family Builders is producing stronger ASPs and gross margins than our underwriting. We are experiencing faster synergies than anticipated by combining our operations in Florida. While we expect the sales environment to remain challenging in the near term, we remain optimistic about the outlook for the industry and our company over the long term. There continues to be a lack of existing home inventory in our markets, particularly at the more affordable price points, and the cost of rental alternatives remain high. In addition, we continue to see a strong desire for homeownership by the millennial buyer cohort, which is looking for the customization and stability that a new home provides. We believe that Landsea is well-positioned to take advantage of these trends by focusing on the more affordable segments of the market and by offering home buyers the latest in new home innovations through our High Performance Homes. We feel our unique offering, home offerings are a true differentiator in our markets and provide a clear competitive advantage versus the competition. With that, I'd like to turn the call over to Mike, who'll provide more detail on the operational aspect of our business. Thanks, John, and good morning to everyone. I would like to echo John's sentiments about our company's solid execution this quarter. The team did an outstanding job in this environment of sharp interest rate increases, continued supply chain issues, and even a hurricane right at quarter end, and still produced a very profitable quarter for our shareholders. As John mentioned, our order activity in the third quarter was adversely impacted by the run-up of mortgage interest rates, which have more than doubled since the beginning of the year. The sharp increase in interest rates has created a more difficult sales environment for our industry and has put a strain on new home affordability, but we are quickly adapting to this new reality. We are focusing our efforts in the near term on closing out our homes and backlog while looking for ways to improve our overall value proposition, home offerings, and cost structure to stay competitive in the marketplace. We have many levers to pull to generate sales activity and can adjust our operational practices to meet the needs of today's buyers. We are teaming with our mortgage affiliate, Landsea Mortgage, to produce products to help buyers get the payments they need to move in. These initiatives include financing incentives to lower a buyer's monthly payment, including rate locks, rate buydowns, pre-purchasing attractive financing pool credits that can be used towards options and upgrades, and attractive pricing on quick move-in homes. In the third quarter, incentives represented roughly 3.4% of our gross new order value. We remain selective on price reductions, focusing on inventory ready to move in and reselling cancellations. In addition to the adjustments we are making on the sales front, the core tenets of our strategy moving forward will be to focus on streamlining our cost structure and to remain disciplined on the land front. Over the last few years, we have incurred significant increases to our building costs due to upwardly trending housing market. Now that conditions have softened, we will be working with our suppliers and trade partners to make sure that the prices we pay for labor and materials reflect today's market dynamics. We have already seen some relief with respect to the costs associated with the front end of the build process and expect this relief to show up on the back end once the effects of the current slowdown work their way through the system. Additionally, we are working diligently on improving our production cycle times to further shorten the distance between sales and closings, which is already bearing fruit. In the fourth quarter, our focus remains on protecting and closing our existing backlog, which ended the quarter at 1,285 homes. This will also provide a good starting point for incoming momentum for 2023. As John said, we plan on staying competitive in our markets with respect to pricing and incentives and should have a healthy amount of quick move-in inventory for buyers who are looking to shorten the time between sale and close. At the end of the quarter, 37% of our homes under construction were spec starts, where we plan to sell closer to move-in date, and we had 54 finished homes ready for move-in. We are fortunate to have a group of seasoned veterans running our local operations who have been through these times before and are dusting off their playbooks to weather the storm. Overall, we are encouraged by the way our company performed in the third quarter and our outlook heading into the end of the year. As I mentioned, we have 1,285 homes in backlog, worth a little over $740 million in value, a volume increase of 18% over third quarter last year, and a 22% increase in dollar value. This backlog puts us in a great position to deliver another quarter of profitability in the fourth quarter. In short, while there's still a lot of uncertainty surrounding the direction of interest rates, the economy, and the housing market conditions, Landsea Homes has the right strategic focus, financial strength, and operational expertise for whatever comes next. With that, I'd like to turn the call over to Chris, who will provide more detail about our financial results this quarter. Thanks, Mike, and good morning, everyone. As John and Mike said, we are pleased with the results this quarter, delivering $335.6 million in revenues, a 57% improvement over third quarter of last year, puttin g us past the $1 billion mark for the year. The improvement in revenues was driven by a 9% year-over-year increase in our average selling price to $601,000 and home deliveries at 543, a 43% increase over third quarter last year. Our diversification strategy continues to show results with a more balanced portfolio performance across California, Arizona and Florida, with California contributing 36% of our revenues, Florida 32%, and Arizona 21%. This compares to third quarter 2021, where California and Arizona represented 53% and 30% of our revenue respectively. In addition, we closed 11 homes that produced $28.1 million in our New York operations and only have five homes remaining to sell. New orders in the quarter totaled 257, down 7% from last year as we felt the impact of the sharp increase in interest rates and buyers waiting on the sidelines for a more solid direction from the Federal Reserve. As Mike said, to counteract some of this impact, we've been working with Landsea Mortgage to address buyers' payment needs, including locking in 30-year fixed mortgages below 5%, and have seen momentum from these efforts. Landsea Mortgage has a capture rate of just over 75%, and 5% of our buyers in California and Arizona are cash buyers. The credit profile of our buyers and backlogs that use Landsea Mortgage remains strong. Across all divisions, average credit score is 720. Loan to value ratios are coming in at 84%, and the average household income of these buyers is roughly $150,000, with California and Texas coming in above that level and Florida and Arizona just below, as you would expect. The overall slowdown in net orders, however, was reflected in our absorption rate for the quarter. We ended the quarter with an average of 57 selling communities, up from 35 in the third quarter last year. All of our segments, with the exception of our Arizona, hovered around two absorptions per community. Arizona continues to be the most sensitive to affordability concerns. We anticipate closing the year with close to 60 selling communities and expect to average roughly 70 in 2023. For the quarter, home sales gross margin improved 480 basis points on a GAAP basis from third quarter 2021 to 20.9% and 580 basis points on an adjusted basis, which includes purchase price accounting and capitalized interest to 27.2%. In the third quarter, our SG&A expense was $42.2 million, or 12.9% of home sales revenue. This compares with prior year SG&A expense of $29.2 million, or 14% of home sales revenue. We will continue to monitor and make adjustments to our overhead cost structure as the market continues to evolve. Our tax expense for the third quarter was $4 million, which represents an effective tax rate of 16%, reflecting the inclusion of the federal energy efficient home credits, which were extended as part of the Inflation Reduction Act that was enacted into law in August of this year. EBITDA in the third quarter totaled $36.8 million versus $22.6 million for the same period last year. Year to date, EBITDA was $102.4 million, a 116% increase over $47.5 million EBITDA reported for the first nine months of 2021. The strong top line growth, improved operating margin and lower tax rate helped drive an 85% increase in net income compared to the third quarter of last year to $20 million, or 49%, $0.49 per diluted share. The company's prior year net income was $10.8 million or $0.23 per diluted share. On an adjusted basis, the company produced net income of $27.6 million or $0.69 per diluted share, an increase from $0.18 per share in the third quarter of last year. Turning to the balance sheet, we ended the quarter with $198 million in liquidity, which includes $117 million in cash and $81 million in availability under our unsecured revolving credit facility. During the quarter, we increased our credit facility availability by $20 million and remain committed to continuing to expand our lending relationships and borrowing capacity. As John stated in his opening comments, we are focused on strengthening our balance sheet and preserving liquidity in these uncertain times. We feel this will enable us to operate from a position of strength as we move into 2023. We finished the quarter with $585.1 million in total debt and net debt of $467.7 million. Our ratio of debt to capital at the end of the quarter was 46.1%, and our net debt to net book capitalization ratio was 40.6%. As we enter our strongest closing quarter, we expect to generate cash and see improvement in our leverage levels. Now I'd like to provide some guidance for the fourth quarter. This guidance is of course based on the best estimate as of today with the current market conditions. As inflation and interest rates continue to change, their impact may affect our overall results. With the recent changes in interest rates and change in sales pace, we anticipate fourth quarter new home deliveries to be in the range of 750-800 units and delivery ASPs to be in the range of $560,000-$580,000. We anticipate GAAP home sales gross margins to be in the 20% range, with adjusted gross margins hovering around 26%-27%. With that, it concludes our prepared remarks, and now we'd like to open the call up for questions. If you would like to ask a question, please press star one on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star one on your phone now. Our first question comes from Matthew Bouley. Your line is open. Hi, good morning. You have Elizabeth Langan on for Matt today. I just kind of wanted to get started on, you know, asking about incentives. I know that you mentioned that you are seeing some momentum on the financing incentives that you have put in place. Would you mind talking a little bit more specifically about what you're seeing maybe in Arizona and California specifically, given the affordability pressures in those areas? Are you anticipating that you'll need to take any price reductions or maybe if you could just generally talk about how you're thinking about financing incentives relative to potential price discounts in the future. Hi, Elizabeth, this is Mike. Generally, I would say that it's really a mix of incentives and selective price reductions for us currently. Some markets are stronger than others. Some are responding differently to the different adjustments that we're making, in terms of our ability to draw traffic and to get to closing. For the most part, we're seeing really incentives around our mortgage programs that we're offering, specifically around a fixed rate program through a buy-down that allows for a lower monthly payment, and then sort of followed up through any sort of price adjustments that need to take place. We haven't had wholesale price reductions, nor have we gone to one specific incentive across the country. Again, our business is unique, that it's very local, and there's responses that happen locally, and that's where we're adjusting because at the local level, we're listening to our teams and trying to provide them with the tools that they need to be successful against the competitive environment. Okay, thank you. That's really helpful. Kind of touching on the land strategy a little bit and, you know, talking about potential option, like write-downs or impairments. Would you mind talking a little bit about how you're looking to that kind of going forward if prices kind of continue to fall? I know you said the most of your land was acquired between 2019 and 2021, but, you know, on the land that's been acquired more recently, how are you kind of thinking about those prices and the relative risk there? Elizabeth, this is John Ho. I can speak to that. I would say that we've gone back and underwritten all of our land deals and updating that to current market conditions. We are walking away from certain deals that we've been looking at and might have been tied up in terms of deposits. Fortunately, to date, a lot of that has been refundable deposits and due diligence expenses that we might have spent. We are pushing deals out or canceling them altogether if they don't make sense under current market conditions. If market conditions were continued to worsen, we have the ability, as we mentioned, to go back to our land owners ask for extensions, price reductions. I think in a lot of cases, we will get that, given that a lot of our options have some built-in extensions in them. At the same time, if our landowners are not willing to give price reductions, then we will look to potentially walk away from some of those options in the future. To date, we haven't had any write-offs. Okay. Thank you so much. Thank you. Our next question comes from Alex Rygiel. Your line is open. Good morning, guys. Nice quarter. Thanks, Alex. Couple questions here. First, let's start with average selling price. Average selling price in the quarter was $601. If we kind of exclude New York, it looks like it was right around $560, which is kind of your guidance for the fourth quarter. How do you think about ASPs as we look out into 2023? Alex, this is John Ho. I think as we have spoken before, you know, our focus has continued to be in the entry-level and the first move-up segment. You can see how we've really pivoted out of these higher ASP markets, particularly California and also, and then selling out of our New York properties, as you mentioned. As we're growing our portfolio and diversifying our business in markets like Florida and Texas and really growing that business for us, and as that represents a bigger percentage of our overall mix of units, like Chris mentioned, you'll see our ASPs start to moderate and probably continue to come down a little bit for a lot of those reasons, because it's driven by our business strategy and really growing in those markets. It's very helpful. Can you talk a little bit about, sort of the cadence of new orders, you know, last couple quarter or last couple of months, particularly in October as it relates to maybe September or August? Yeah, I'll have Mike take that. Sure. You know, obviously, I think through all the information that's coming through, Alex, that the market continues to deteriorate, and we're seeing that, as well at our communities, primarily in Phoenix, which seems to be really ground zero for what I would call for price correction, in the marketplace. Haven't seen it as strongly, in California and Central Florida for us is holding up, fairly well. Each again, as I said earlier to Elizabeth, you know, each market, is unique unto itself and has its own dynamics. We're seeing some of that flow through, and we're adjusting accordingly. That's helpful. Your outlook for 2023 includes a number of new community openings. Appreciate that guidance. How do you think about sort of absorption targets for 2023 and, you know, somewhat of a obviously a challenged market here, understanding that's kind of the net absorption this quarter was 1.5. What do you think kind of like a good near-term target is for you? Is it 2? Is it 2.5? Is it something higher? Right. This is Mike again, Alex. I think what we've been seeing, as we come towards the end of the year, and we've seen our competitors cleaning up the end of their fiscal year, there has been some inventory I would call flush out, that has created a different type of dynamic against some seasonality. Although I would say that the seasonality is not really the issue. As it has been in the past, I think that, you know, for us, generally, we believe that there's a natural flow to our communities that need to be maintained, and that roughly is around 3.0. You can straddle that, you know, at a 2.5, maybe a 3.5, and that's sort of a nice natural flow of the community in terms of absorptions. We do believe that our business has to have momentum in it. Sales are the lubricant of everything we do in terms of our organization. We really gear our business around our offerings, incentives, and price discounts to maintain sort of roughly around that 3.0 sales base. Very helpful. Thank you. Our next question comes from Carl Reichardt. Your line is open. Thanks. Morning, guys. How are you? Fair enough. I just wanna be clear about this. The 70 communities for 2023, that target, is that a period end target or an average target? Then as you're looking to ramp the individual markets, I'm assuming Texas is the place where the growth is gonna be most significant, but how does that 70 lay out between the other three major markets? Hi, Carl. This is John Ho. Hey, John. It's an average. A lot of that obviously is from our growth in Florida, and then our upcoming growth in Texas. This year has been particularly a year of growth for us, as is reflective in our numbers. We'll have more communities that obviously open in those markets next year. We're also maintaining our scale that we have in Arizona and California as well too. We do see that pretty nicely distributed between each of those respective markets, with Texas probably still catching up. You said what a lot of other builders have said about the front end of the process, the construction process beginning to ease up some in terms of labor availability. Can you define where front end ends? So is this through frame, or are we getting to frame at all? Are we starting to see any kind of movement in the mid-end trades or the finish trades? Hi, Carl. It's Mike. Generally for us, it's two components on the front end. One is from the sales to the start, in which we saw a huge lag back coming out through COVID, where normally you could go to a city and pull a building permit within two weeks. In some cases, it turned into three months, which was a huge drag in terms of the overall cycle time and holding a buyer in escrow. That has adjusted meaningfully for us. That's really great news as we're seeing cities coming back online and inspections happening quicker and plan check being done faster. From that standpoint, that's been great. We're also seeing some positive adjustments in our cycle time as in the front-end trades around really the rough. It'd be your framing, your concrete, your plumbing, your HVAC, electrical. Those front-end trades are really kind of pivotal in terms of giving you really either a real strong head start going into that house build time, or it can really lag as those things back up, and then there isn't capacity further down the cycle time to catch up with it. We're seeing our, for instance, our concrete, our foundation guys actually getting to the site when they're scheduled to get to the site, which is victory number one. We're seeing a pretty consistent follow-up on the trades on the rough side coming through. What we've experienced on the back end is really just the bottlenecks of the finish, you know, the trim out on the plumbing, the finished carpentry. Some electrical, where that is just, you know, there's a huge amount of inventory rolling through right now, and they've been pressed and stretched, and that we hope going into next year will alleviate itself. For instance, let me just sort of give some perspective. In Arizona, there have been roughly, going through the last two years, roughly around 3,000 starts per month. That has trimmed back down to about 1,100. That's taken a lot of pressure off the trade pools out there, and we're starting to see that come through. That's really helpful color. I thank you. Then this is my last question. I think you said you had 54 finished specs end of the quarter. What's the ideal number for you as you guys look at your business in a normal time? Would you wanna have any finished specs per store or one or two? Or what's the kind of number that you target in a normal environment? Yeah, this is Mike again. You know, it's a finished spec is a euphemism for standing inventory, which is never good. Yes, it is. For me, the answer is zero. We would really love to have a house sitting there unoccupied that's finished. However, when we're talking about spec starts or specs going through the system, you know, we generally feel like that if you had a start of 10 units on a line, if you're out there with three to four, possibly depending upon where you're at, maybe three, and that's rolling through, that's sort of natural for us. That's always been kind of the case. Of course, if you have a community that is attached, you're always gonna inherently have a higher spec level on your starts because you're starting six to eight to 10 in a building, and so those will not always be sold. Some don't sell as quickly as others, particularly the inside units of a building seem to lag, and so that sort of escalates or elevates spec inventory. You know, for us, we monitor it heavily. We don't like inventory to drag on our WIP. You know, it's inefficient use of our capital. For us, again, if you have two or three that are four or five maybe in a community, that's okay, but we don't like to get much more than that. We want them sold. We want people living in our houses. I appreciate it, Mike. Thanks so much for the help. Thanks, guys. Thanks, Carl. As a reminder, if you do have a question, please press star one on your telephone keypad now. Our next question comes from Alex Barron. Your line is open. Yeah, thank you. I wanted to just ask briefly about New York. I saw there's only seven lots remaining, so I think by my count, that means there's only five homes left to sell. Is that gonna be like your last community and you guys are closing out that state, or is there some future beyond that? Hey, Alex, this is John. Yes, that's correct. We have one building left, and that's FÖRENA on 14th and 6th. The 50 units only got five left to sell. Actually, probably four as of now. Okay. I'm saying, are you guys exiting that market after this building is done? That's correct. This would be our last asset, and then the capital, the return we would reinvest into our horizontal business, and we'll be no longer in New York. Got it. You also mentioned that I think Arizona was experiencing more sharp price declines, and I see your orders were down somewhat in that state. What do you think is causing that or what's different about this state and is this a sign of the future or there's just something unique to this market? Hey, Alex, this is John. Specifically around the Arizona or Phoenix market, I think that market's probably declined more given a more commodity driven market. There's also a lot of competition. There was a much faster ramp up in pricing there as well. It's also been very, very active with the SFR and BTR community out there. I think a lot of that has also slowed down, and that's why there may be this bulge of inventory that's really coming through this end of the year, like Mike mentioned. A lot of home builders that might be cleaning up at the end of their fiscal year are taking more drastic price reductions in that specific marketplace. Got it. If I could ask one more, what were your starts in the quarter, and what is your general approach to spec building versus build to order, you know, given everything that's going on and long build times and rising interest rates? You know, how are you guys positioning for that, and what were your starts in the quarter? Hey, Alex, this is John again. We don't disclose that level of detail, but I can say that we are managing our starts to align with our sales as well. Mike did mention earlier in the prepared remarks that just under 40% of our homes for the quarter were spec starts. We do believe in maintaining a minimum volume through our business because sales orders, absorptions at 3.0 per community per month is what we believe is the lubricant that we need to continue to run our business efficiently. Got it. Thanks a lot. Thank you. We have a question from Alex Rygiel. Your line is open. Thank you. My questions have been answered. Thank you. We have no further questions in queue at this time. Well, thank you everyone for joining our call today, and we appreciate the attention. That concludes today's conference call. Thank you for attending.