Good morning ladies and gentlemen and welcome to the United Homes Group Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, March 14, 2024. I would now like to turn the conference over to Erin Reeves McGinnis, General Counsel for United Holmes Group. Please go ahead.

Good morning, and welcome to the United Homes Group fourth quarter and full year 2023 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. United Homes Group cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties which change overtime. These risks and uncertainties include but are not limited to the risk factors described by United Homes Group 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. 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 and comparable GAAP measures can be accessed through the company's website in its SEC filings. Hosting the call today are united United Homes Group President, Jack Micenko; Chief Operating Officer, Shelton Twine; and Chief Financial Officer, Keith Feldman. With that, I'd like to turn the call over to Jack.

Thanks, Erin. Good morning and thank you for joining us today as we review our fourth quarter and full year 2023 results, and provide an update on current market conditions. United Homes Group made great strides in 2023 by executing on several strategic initiatives that we believe will set us on the path to becoming a large scale production home builder in the Southeast United States. We're pleased with what we've accomplished during the year and believe that we're in a much better place both, financially and operationally today than we were a year ago. Here's a brief recap; some of the highlights from the year. In the spring of 2023, Great Southern Homes and Diamond Head Holdings closed their business combination have resulted in the formation of United Homes Group, a landline home builder focused on building single-family homes at affordable price points. The goal is to take Great Southern Homes proven track record of success and replicate it in other high growth markets across the southeast through acquisition, and small private builders and a more efficient approach to land acquisition and development. All in the close of this transaction, we immediately set out putting our capital to use. In August we announced the acquisition of Herring Homes in Raleigh, North Carolina, and quickly followed up with the acquisition of Rosewood Communities in the upstate region of South Carolina in October. The Herring acquisition marked our initial foray into the attractive Raleigh Durham market, while Rosewood solidified our already strong presence in the Greenville, Spartanburg and Clemson markets. Subsequent to the end of the year we announced the third acquisition of Creekside which has a strong presence in the coastal area of South Carolina. Similar to Herring and Rosewood, Creekside fits nicely in our land-light strategy, as well as…

Thanks, Jack. And good morning to everyone. Net new orders for the four quarter came in at 294, representing an 8% increase over the fourth quarter of 2022. Demand picked up into the start of the New Year as we generated 260 net new orders in total for the month of January and February combined. We have seen good traffic trends at our communities and improved buyer confidence as evidenced by our lower cancellation rates of 10.1% for the quarter, and 6.2% for the first two months of the year. Incentives remain a key selling tool, particularly ones that drive affordability; that we have been able to raise base prices at a handful of communities that have been experiencing above average absorptions. We closed 387 homes in the fourth quarter, which was flat on a year-over-year basis. We made a concerted effort to ramp-up our starts during the quarter to make sure we had enough homes in production ahead of the coming spring selling season. We started 308 unsold homes during the quarter, which was a 75% increase over last year. We continue to see healthy demand for move-in ready homes, and we're well equipped to meet this demand as we move through the spring. Cycle times came down during the quarter and we are now back to building homes in roughly three months’ time. The shorter cycle times will go a long way towards improving our inventory terms, and getting homes closed in a more timely manner. We're constantly looking for ways to take cost out of the business and improve our processes, a mindset that has been a part of our organization from the beginning. Overall, we feel good about current market conditions. The spring selling season is off to a solid start and we are seeing a steady flow of motivated and engaged buyers come through our communities. Affordability remains an issue for some buyers but we have several incentive tools at our disposal that can help address that. The availability of labor and materials has improved greatly as compared to last year, leading to shorter cycle times and better visibility into our operations. We're very optimistic about the long-term health of our existing markets and look forward to expanding our homebuilding footprint as we execute on our growth initiatives. With that, I'd like to turn the call over to Keith, who will provide more color on our financial performance.

Thank you, Jack and Shelton and good morning. For the fourth quarter of 2023, net loss was $67 million, which included a change in fair value of $69 million, primarily related to the accounting for the potential earnout which will fluctuate on our financial statements each quarter based on our ending stock price. This earnout will be paid only in common shares upon reaching certain stock price hurdles, and can never result in a cash expense for the company. For the year ended December 31, 2023 net income was $125 million, which included a change in fair value of $116 million, primarily related to the accounting for the potential earnout liabilities. Revenue for the fourth quarter of 2023 was $117 million, compared to $115 million for the fourth quarter of 2022. Revenue for the year was $421 million, compared to $477 million in 2022. Home closings during the fourth quarter of 2023 or 387 homes, compared to 389 homes in the fourth quarter of 2022. Closings for the year were approximately 1400 homes, compared to approximately 1600 homes in the prior year. Average sales price during the fourth quarter of 2023 was $320,000 for 338 production-built homes; this compares to an average sales price of $300,000 during the fourth quarter of 2022 for 371 production-built homes. Average sales price for the year was $316,000 for approximately 1300 production-built homes; this compares to an average sales price of $296,000 during 2022 for approximately 1500 production-built homes. As Shelton has mentioned, our net new orders during the fourth quarter of 2023 were 294 homes, compared to 271 homes in the fourth quarter of 2022. Net new orders for the year were approximately 1300 homes, compared to approximately 1260 homes in 2022. Our backlog at the end of the fourth quarter was 189…

[Operator Instructions] Our first question comes from the line of Carl [ph] from BTIG. Please go ahead.

So I had a couple for you. Shelton, first you talked a little bit about having some pricing power in a few communities. I wondered if you could expand a little bit on that. Was there a particular location or price point where you where you saw that power? And sort of an adjacent question is, how are you looking at your lower price product performance from a sales traffic turnover rate perspective and your higher priced product? And has there been any alteration or differences you started the new year?

Yes. On the on the first question Carl [ph], we're starting to see some communities, you know, primarily in the Midlands, in the Upstate and our markets where we are starting to see some price increases; so that's a positive. On the lower priced product, we are seeing good margins in all of that product. And in terms of the way we utilize our forward commitment on our incentive piece, that's what's been really good in terms of keeping our conversion rates high; and relatively low on the cancellation side because again, that's such a short window on the forward commitment piece tied in with what we're selling completed inventory. So that's where we're very optimistic again, and getting those turns and managing that cancellation rate.

Carl [ph], I would say we were able to see some price increases in around 10% to 15% of our communities in the first quarter. And that was a refreshing changes probably the first time we've seen that in three or four quarters.

All right, that's helpful. Thanks, guys. And then can you talk a little bit about your plans for community count expansion in 2024? You don’t need to give specifics, but you have a sort of a rough sense of X acquisitions, how you might be looking to grow the business from a store camp perspective in this coming year?

Yes. Without giving guidance on an organic basis, you know, I think we would be comfortable talking about a high in single digit, low double digit organic store count increase for full year 2024 versus full year 2023.

Is that percentage percentage or number of stores, Jack?

Percentage of the number of stores.

Percentage. Okay, thank you. And then my last question is -- and I think I've asked this couple of times before. Just on acquisitions, as you're out there looking; it seems like a bit of a mixed environment. We're seeing some things happen, we've heard some private builders have been looking at their capital structure, their land position and wondering about the future. And I'm just curious sort of what you're seeing and feeling? Does it feel like an easier environment and more deals coming over the trends now versus six to nine months ago or fewer? And how is it fast pricing [ph]?

Like homebuilding, I think there's a lag effect from when you actually have the conversations or when you contract when you actually close the home or close the transaction. The headwinds from last year -- the significant move in rates [ph], I think it brought more conversations to the table. I don't know if we've seen the conversion of those conversations to closings, both on conversations we've had and deals we know that were marketed; there have been a few that were actively marketed assets in over the course of 2023 that made the headlines. But there is a lot of conversations and a lot of assets that haven't gotten over the trends [ph]. So, I don't know -- I think the appetite of sellers increased last year because of the environment -- they were -- we were all looking at and contending with. But we -- we can also tell you that, no surprise to anybody in this call that the picture has improved, really since January. And if history is a gauge, you know, some of those folks that might have been entertaining a sale six, nine months ago, might be feeling pretty good about their business this spring. So it's kind of a mixed bag, we continue to have conversations regularly; introductory ongoing conversations. We want to be in the mix when a potential seller does finally pull the trigger, we want them to know what our story is and how we're different; that we are another option to them when they decide to monetize their business.

Right. I appreciate that, Jack. Thanks so much, guys. Nice to talk to you.

[Operator Instructions] We have our next question coming from the line of [indiscernible]. Please go ahead.

What are you guys seeing in terms of just overall gross margins for this year versus last year; just with current market dynamics out there?

Yes. I think we feel comfortable with a margin outlook that for us is flat year-to-year. We ended the year last year, a little bit north of 21% [ph] adjusted margin; 21.5% [ph] or something like that. I think costs -- build costs have moderated, some -- obviously lumbers have come down but we have given a lot of it back; it is on the financing side. And financing incentives are a cost of doing business like windows or lumber or anything else; we have to do what our competition is doing, it gives us a great leg up on existing market. But for -- and remember we’re a SPEC [ph] builder, so these financing incentives really only apply because of the way the financing buy downs and forward commitments work. We really can only apply these to homes that are going to be completed the next 60 to 90 days, which fortunately for us is a big part of our business, and it goes a long ways to the affordability side. But that's -- when you look at that impact, you know -- and we look at it every single week and we look at it multiple times a week, and we're buying tranches all the time. That's a 300 to 400 -- like 400 to 600 basis point [ph] headwinds to the top line margins. So, I guess the other way to put that would be -- if interest rates weren't north of 7%, you know, I think industry -- our margins would be closer to that 26% to 28% range, all else equal. Now, you got to be realistic, and if rates do come down -- what I've learned about the business is, there is no free lunch, you're going to give back some of that on cost, you're going to give someone back on materials. But right now, financing is the biggest delta to fully loaded margin in ours, and I would assume with most other builders that you talk to.

Okay, great. One, last question. Is there is there any plans to increase the credit facility? And if so, what type of leverage are you guys -- on the EBITDA are you guys comfortable with as a company?

I'll answer the first part of that and I'll let Keith kind of weigh in on the second part. But I don't think we would look to increase our credit facility standalone today, given our capacity; absent an M&A transaction would acquire it. And I don't think the leverage would increase per say, we would just be adding incremental volume and assets and EBITDA. I don't think we have an appetite to increase our leverage ratios outside of our working capital lines; I don't -- I don't see subordinated debt or other straight debt. We've got the $80 million out today on the convertible note, I don't think we would see that number increase debt. We have a saying, your debt kills cyclical businesses, and we're not looking to be over-levered on a line itself and some of the covenants and ratios [ph]. Keith, you want to chime in?

Yes. I mean, Chris, we look at it more on a debt to book value. So I think we're comfortable at like -- you know, two times. So, like Jack said, we're not looking to over lever; we're looking to delever overtime. But I think around two times, on a debt -- debt to GAAP [ph] basis or debt to book value basis seems reasonable to us to kind of where we are today.

There seems to be no further questions at this time. I'd now like to turn the call back over to Mr. Micenko for final closing comments.

Well, thank you everybody for participating in our fourth quarter call, and we look forward to updating you on the progress we make through the balance of the spring selling season in a few months on our first quarter call in May. Thanks, everybody. Have a great end of the week and weekend.

Thank you, Sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line. Have a lovely day.