Greetings. And welcome to Century Communities Fourth Quarter and Full Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Scott Dixon, Chief Accounting Officer for Century Communities. Thank you, Mr. Dixon. You may now begin.

Good afternoon. We would like to thank you for joining us today for Century Communities fourth quarter and full year 2016 earnings conference call. After the market closed today, we distributed a press release detailing our fourth quarter and year-end 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 will turn the call over to Dale.

Thank you, Scott. 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, balance sheet and 2017 outlook. Following our prepared remarks, we will open the lines for questions. A healthy pace of activity continued through the fourth quarter to help us deliver another record year of earnings which totaled $49.5 million or $2.33 per share. This represents an exciting milestone as the 14th consecutive year of profitable results for now more mature and established company. As we look at our history, most of our growth has developed during the past four years. From 2012 to 2016 we have expanded home sales revenue, operating income and adjusted EBITDA each by a factor of 10 times. Our business today enjoys three underlying attributes that were not available to us when we began our transformation four years ago. First, our dramatically expanded scale has and does allow us to achieve impressive year-over-year results. Second, we have achieved increasingly stable and predictable performance as a result of a more established operations and better visibility as we look forward. And finally, we have recognized sustain growth and returns on equity that are taking additional steps to generate even greater returns in 2017 and beyond. Our consistent accomplishments are the result of our efforts to expand and enhance operations in each of our markets to further augment our position as the top 25 U.S. homebuilder. We have remained true to our principles to grow end markets with sound fundamentals through a cycle tested approach with a focus on enhancing returns on equity. To that end during 2016 our ROE increased by 100 basis points to 11% compared to 10% in 2015 and 7% in 2014. We are…

Thank you, Dale, and good afternoon, everyone. 2016 was a very productive year for Century Communities. We achieved four quarters of consistent progress to end the year with a much stronger and diverse platform. During 2016 we’ve strengthen our positions in all markets. We delivered a full year of considerable organic growth in new contracts, home deliveries and earnings. This success reflects our teams’ hard efforts to capitalize on favorable demand trends in our markets. Full year net new contracts increased 21% to 2,860 homes and for the fourth quarter, contracts grew 25% to 569 homes led by Nevada, Central Texas and Colorado. We ended the year with the backlog dollar value of 12% to $302.8 million from the prior year. This was helped by steady order activity continuing into the fourth quarter with our absorption pace improving by 24%. We have achieved these higher absorptions without sacrificing price. This is evidenced by average selling price and backlog which increased by 6% year-over-year. ASP and backlog has moved higher in each key region reflecting the success of our new communities and product offerings. With the exception of minor benefits from our new Utah division, all of this growth in contracts and backlog was generated by continued expansion within our existing markets. We are pleased with this progress, and as Dale discussed earlier, we continue to put our capital into wise investments that are aligned with our strict return hurdles. This includes our sourcing of additional land parcels that we are disciplined underwriting requirements. Overall, we ended the quarter with the land inventory of 39% year-over-year to 18,296 owned and controlled lots. Now looking at our market portfolio, the overall trend is positive. Beginning with the Southeast, in Atlanta our efforts to upgrade our mix across price point and product type…

Thank you, Rob. Our strong 2015 results continued into the fourth quarter. During the quarter we increased net income by 15% to $15.1 million or $0.71 per share compared to $13.2 million or $0.62 per share in the prior year quarter. This great progress reflects the expansion of our homebuilding operations and improving returns on equity. For the fourth quarter, our pretax income was $21.9 million. For the full year our pretax income was $73.1 million, an increase of 21% year-over-year. Our net income was $49.5 million or $2.33 per share compared to $39.9 million or $1.88 per share. Fourth quarter adjusted EBITDA grew 25% to $30.9 million, compared to $24.8 million the prior year quarter attributable to revenue growth. Adjusted EBITA for the full year was $99.9 million up 28% compared to $77.8 million in 2015. Home sales revenues for the fourth quarter were $292.4 million, an increase of 43% compared to $204.5 million in the prior year quarter. This improvement in revenues was mainly driven by 26% increase in home deliveries to 812 and higher average selling prices which increased to $360,100 in the fourth quarter 2016 compared to $317,100 in the prior year quarter attributable to a shift in regional and product mix in core price gains. For the full year we grew home sales revenues by 35% to $978.7 million and home deliveries by 18% to 2,825 homes. Net new home contracts for the fourth quarter increased to 569 homes, an increase of 25% compared to 455 homes in the prior year quarter, mainly due to stronger demand trends in most of our divisions driving an overall increase in absorption rates led by Nevada, Colorado and Central Texas. For the full year net new home contracts increased to 2,860 homes, an increase of 21% compared to…

Thank you. [Operator Instructions] Our first question is from Jay McCanless of Wedbush. Please go ahead.

Hi. Good afternoon, everyone. Thanks for taking my questions. The first question I had on the SG&A line, $34 million was certainly higher than what we were looking for. Are there any one-time items in that number and could you maybe talk about how we have modeled the run rate without going into ’17?

Yeah. Hey, Jay. It’s Dave. In the fourth quarter we had several investments that we have made that we [inaudible] (27:19) platform. Our financial services subsidiary hired new individuals involved with compliance, secondary market accounting, IT field personal, we had preparations for surpassing the $1 billion threshold in 2017 negatively transact, so those investments were relatively expensive. That involved hiring numerous consultant and several in-house people. We engaged not only in-housing accounting firm but also engage our current auditors to do fair amount of testing and documentation and it almost cost a $1 billion threshold this year. We also made -- as we have discussed previously several investment in our Salt Lake and Charlotte operations. Currently our Salt Lake Division has two open communities and as Rob mentioned, that’s going to grow to seven by the end of the second quarter and both the Salt Lake and Charlotte division have had ran personal sales and operation individuals hired as they claim for the growth in 2017, 2018, a lot of those investments were obviously one-time items that happened in 2016 that will produce a meaningful result held into 2017 and ’18. So as we look at -- look forward going into 2017 with fourth quarter being approximately SG&A as a percent of home sales revenue is 11.9%, we expect that or a number similar to that for full year 2017.

Okay. Great. And then second question I have, as I look at the closing mix on geographic basis from Q3 ’16 to Q4 ’16 there wasn’t really much change in terms of percentage mix except for the Utah houses coming on. Is that one of things that led on gross margin sequentially or did you guys get a little more aggressive and try to clear out some old specs. Can you talk about that shift from Q3 to Q4 please?

Hi, Jay. It’s Dale. We saw really nothing in the market that weighed heavily on the gross margins. Regarding it’s some variation from quarter-to-quarter depending on product mix it comes through. About the only thing that that we are seeing, I think, consistent with other people is we are seeing continued pricing pressure from some of our trade partners, that's not anything new, it’s something that we’ve been experiencing now for probably going on upwards of couple years. So nothing unusual or nothing that we saw that occur in the fourth quarter that's different than really what we saw throughout the year.

Okay. And then the last question I have, could you guys give us any color on January, how orders trended for the month?

Sure. So we look at January, first couple weeks were pretty quiet, different than the way 2016 started. At that point it’s just kind of light switch went on and it really kicked in and we ended up January, for example, incrementally higher than we did in 2016, notwithstanding, the slow start. And as we got into February we have seen pretty much a continuation of that same trend.

Okay. That sounds great. Thank you, guys.

Thank you.

Thanks, Jay.

Thank you. The next question is from Michael Rehaut of JP Morgan. Please go ahead.

Hey. Good afternoon. This is William for Mike. I guess switching to some of the regions that you talked about. You have done a great job holding margins steady, given some of the headwinds you talked about. But I guess given your new North Carolina and Utah positions, can you maybe update us on where you are seeing pricing are?

So looking at Salt Lake City and Utah, basically the lots we have went in and purchase there have been generally speaking finished lot deals on a rolling option. And so, with that, our margins were slightly below maybe on a consolidated basis, but still in the upper teens with interest included in that and we see that continuing. In addition to that we've also now started developing our own lots in that market and we see those margins rising above that number for the risk reward for developing those lots and so we would see those communities have a higher margin. In the Charlotte market, we have started out the same way to get our feet on the ground and that is to get finished lots in that market and that's where we positioned ourselves from an initial standpoint. Again, margins in the higher teens for that type of product we will transition, we haven’t done it yet, but we will transition in that market to also do self development of lots and then at that point we would expect higher margins.

Okay. That helps. And I guess, on the some of the older markets, but in Colorado you are seeing some of labor constraints still being kind of the headwind during that lining up?

It’s -- it really hasn’t changed significantly. The markets that we are in are attractive markets. There is competition in all of the markets and so when we look at that we've been experiencing trade shortages for some time and we're not seeing it really escalate, but we are not seeing it go away, something that is part of our job to manage our trade partners and manage our business to mitigate it as in many ways we possibly can.

We are seeing some early signs though as the apartment construction is starting to slowdown in some of the markets. We are seeing a free up of some labor as a result of that and we think that is a trend and will continue.

Okay. That makes sense. Thank you.

Thank you. The next question is from Will Randow of Citi. Please go ahead.

Hey. Good afternoon, guys and congratulations on the progress.

Thanks, Will.

You mentioned a couple of points that dovetail together well, but I was missing one, that is your expectation for free cash flow, given it sounds like community growth, it feel like it’s going to be somewhat flat with I assume absorption stronger and on that note where you are investing cash incrementally, it sounds like Southeast, Utah, but how should we think about positive, negative free cash of that working capital line item as well?

Hey, Will. This is Dave. I think that from a cash flow perspective you are going to see us reinvesting in our markets that obviously we have a great opportunity to invest in the Southeast, not only to our Atlanta platform but also from our new markets in Charlotte, and obviously, with Utah we are going to be investing dollars in those markets. But also we have some significant opportunities in some of our other markets where we have a smaller market share and we can invest capital in order to grow our presence in those markets.

So just to pinpoint you guys will be using your working capital in 2017 with [inaudible] (34:53) or how should we think about that?

I would think that that’s a fair statement, yes.

Okay. Make sense. And in terms of, it’s good to hear you guys are talking $200,000 price point on entry level, one of the few California -- oh, sorry, Colorado builders will get that. Can you talk about particularly how you are thinking about product what you are going to hit that work, is it predominately Denver or you are going to stretch out with that and what's the run rate on expanding the new entry-level product?

Yeah. Well, we are starting that in Denver as we mentioned. Our product line up starts at around 1,400 square feet and goes from there. It’s like the name Century Complete. It’s a complete from an amenity package inside of complete package house and at those lower price points. You can imagine that that's a very attractive price point in the Denver Metro area when you look at the average ASPs for new home construction. As far as rolling that out outside of Denver, Atlanta is prime for that where historically we've done entry level but not quite to that level and so we are going to expand into that in that market, as well as we are doing this going forward into Central Texas, and of course, Houston as well. So we see tremendous opportunity for that on a go forward basis. In addition, playing off, as we mentioned playing off the entry level standpoint in the U.S. right now where everybody seems to be migrating down to that and there is certainly tremendous amount of demand there. The Wade Jurney model that we have invested in continues to play directly into that market exclusively.

And lastly if I can sneak one and what’s your anticipation in terms of capture rate for your new housing finance arm and congrats again.

Hey. This is Dave. I assume a very high expectation for finance arm but given we are seeing a process of appealing warehouse lines, venture approvals, licensing, staffing, we are not really in a position yet to put out any kind of the capture rate, we will do that later in the year as we get that operation going.

Thank you.

Yeah. Thanks, Will.

Thank you. Our next question is from Nishu Sood of Deutsche Bank. Please go ahead.

Thanks. Just following up on the entry level, obviously, a topic of quite a bit of interest to investors. You got the Wade Jurney approach, obviously, Peachtree had -- has sound approach to the entry level and now you are talking about this new product in Denver. How should we think about how you're going to overlap those and expand those and think about the appropriateness? I mean, I know there are some builders that, your largest peer in Atlanta, for example, has a couple different approaches to entry level? So how should we think about the broader entry level strategy and you are going to mix and match those in a way that most tragic results?

Hi, Nishu. It’s Dale. In terms of our platform we’ve -- we always focused on building a wide variety of products so that we could appeal to a wide buyer demographic. We are not going away from that. But the entry level buyer continues to come back into the market and we want to be able to have that as a large percentage of our business. As we look at our entry level today within the Century line, it’s between 45% and 50%, and we have the ability to increase that or decrease that depending on where we see the buyer demand. And so from that standpoint that's really the plan that we are continuing on doing. Within the Wade Jurney business model, it's a different business model in that. There is no model homes, it sold from retail centers and it is an entry level price point typically sub 150 on an average that is even below what we are targeting within the broader Century.

Got it. Got it. Okay. Your overall entry level percentage then, where is it currently and you mentioned the Century branded a percentage of portfolio? Where would you look to drive the entry level percentage, I mean, obviously, the historic benchmark market overall and for builders overall has been about the 40% to 45% range. Where are you now and do you think about it in terms of target?

We really don't think about it in terms of target. That's, as I said, we think we are in that 45% to 50% right now. We think we have the ability to increase that percentage. We think that market is there and readily accessible to us. But as opposed to saying we have a percentage that we want to hit. It’s really on a case by case, deal by deal basis on where we think we can invest our capital with the greatest return.

Got it. And a question on gross margins, you mentioned that, Dave mentioned that, cost pressures influencing obviously the gross margin and the trend, similar gross margin levels in ’16 versus ’15, but ‘15 had a more of the rising trend and ‘16 had a declining trend. How should we think then about ‘17 gross margins, are we kind of starting off the year where ‘17 where we ended ‘16 and could there be downward pressure from there, how should we think about that?

I think as we look at 2017 we look at our backlog and kind of a pro forma product and market mix. I think 2017 will be at levels consistent with the fourth quarter of 2016. Now giving each quarter we are going to have some fluctuation in a very big market product, but for the full year 2017, it will be fairly similar to where we ended the year and the fourth quarter 2016.

Got it. And the interest in the -- went out -- to over 2% -- 2.2%, I think, it was in 4Q, given your debt-to-capital then change much over the course of year, but the interest has crapped up, are we reaching about a steady-state on that, because you seem to be kind of holding in the mid-40s on your net debt-to-capital?

I think, you may see a creep up a little bit more as we go later in this year given that we did the deal in January for $125 million at [ph] 102 par (42:06). So by fixing some of the debt we had on revolver that will create some incremental increase to it, remain on to that until second and third quarter as that product grows.

Okay. Thank you.

Thank you, Nishu.

Thank you. [Operator Instructions] The question is from Alex Rygiel of FBR. Please go ahead.

Thank you and nice quarter gentlemen.

Thanks.

Thanks, Alex.

Quick question, as it relates to the mix of owned versus controlled lots have changed a little bit. Is there going to be any impact or shift in gross margin from that?

No. We don't see that at the present time. I mean, we’ve purposely gone to a higher mix of controlled. However, we don't see that really changing, as Dave just talked about, gross margins, what we are expecting for 2017. We don't really see that changing off Q4 of ’16.

And in your prepared remarks you talked a little bit about cost inflation and then in the Q&A you addressed some of vendors, were there any other cost inflation that have sort of creeped up or developed? And can you sort of comment on historically how easy it is for you to sort of push cost inflation back onto either the consumer or the seller of land, such that you can maintain steady margins?

Alex, in terms of, there is obviously the cost component related to the vertical side of the business that we have been experiencing for some time. With regard to land, land is in general getting a bit more expensive, that's obviously another large part of the cost component that goes in. We really don't find land sellers in a position where they're willing to accept much of that. We obviously try to educate them as much as we can in terms of what acceptable returns are, but in most of our markets our competitors are actively buying land as well and so there is, obviously, a fair amount of competition for that. With regard to increasing the price and push it on to the consumer, we try to do that where we can. It’s down to the individual subdivision level within the market and some markets we continue to have a pretty consistent pricing power, in other markets we don’t, where we don't see pricing power we are looking at, can we introduce a different product so that we can deliver a less expensive home and have be able to deal with some of those cost pressures. And so there is a variety of different levers. It depends on the situation down at the subdivision level and we tried to use them all.

Very helpful. Thank you very much.

Thank you, Alex.

Thank you. The next question is from Alex Barron of Housing Research Center. Please go ahead.

Congratulations gentlemen. Good job.

Thanks, Alex.

I was wondering if you guys could comment on, not sure but if I missed it, if you guys could comment on any noticeable changes in cancellation trends from year-to-date versus a year ago?

No. We really haven't seen anything significant. Obviously get some fluctuation just because of circumstances, but relating to individual buyers, but there is no trend that's creating any concern for us.

Okay. Great. And second question is, if you can comment on your thoughts or appetite for M&A this year, what your thoughts are on that?

Our appetite remained strong. We are seeing a bit more deal flow that started occurring in the latter part of last year, continuing into this year, more so than we saw a year ago and our appetite hasn’t changed at all, that was, as we look at that, that was part of the reason that we actually expanded our bond offering recently so that we freed up additional capacity there. We did two greenfields in 2016, which is not our preferred way to expand in the market, but we just haven't found the opportunities there in M&A bases, yet that was a good way of entering those markets. But as we look forward into 2017 we are optimistic that we will be able to find additional opportunities.

Okay. Best wishes for this year. Thanks.

Thanks, Alex.

Thanks, Alex.

Thank you. We have no further questions at this time. I would like to turn the conference back over to Mr. Francescon for any closing remarks.

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 today's teleconference. You may disconnect your lines at this time. And thank you for your participation.