Greetings. Welcome to the Century Communities Third Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Please note this conference call is being recorded. I will now turn the conference over to Tyler Langton, Senior Vice President of Investor Relations for Century Communities. Please go ahead.

Good afternoon. Thank you for joining us today for Century Communities Earnings Conference Call for the third quarter, 2026. Before the call begins, I would like to remind everyone that certain statements made during this call may constitute forward-looking statements. These statements are based on management's current expectations 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. Certain of these risks and uncertainties can be found under the heading Risk Factors in the Company's Latest 10-K, as supplemented by our latest 10-Q, to be followed shortly in other SEC filings. We undertake no duty to update our forward-looking statements. Additionally, certain non-GAAP financial measures will be discussed on this conference call. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are included in the earnings release furnished to the SEC and posted on our Investor Relations website. The company's presentation of this information is not intended to be considered in isolation or a substitute for the financial information presented in accordance with GAAP. Hosting the call today are Dale Francescon, Executive Chairman, Rob Francescon, Chief Executive Officer, and Scott Dixon, Chief Financial Officer. Following today's prepared remarks, we will open up the line for questions. With that, I'll turn the call over to Dale.

Thank you, Tyler, and good afternoon, everyone. The third quarter was marked by a significant rise in interest rates, continued inflation and macroeconomic uncertainty, which weighed heavily on consumer confidence in general and first-time homebuyers in particular. As we moved through the quarter, our buyers became more cautious, did not feel an urgency to transact, and felt more comfortable moving to the sidelines. As a result, our traffic, conversions, and orders all slowed weighing on our deliveries and gross margins. These trends have thus far continued into October. Despite these pressures, we continue to make good progress on the operational side of the business during the third quarter and continue to execute on our strategy of deepening our share in existing markets. We grew our ending community count by 7% year over year, and 4% sequentially to a new company record of 343 communities. Our direct construction costs, finished lot costs and fixed G&A excluding advertising all decreased versus the prior quarter as we continue to effectively manage our costs. We also grew our book value per share to a new company record of $90.61. In early October, we acquired HistoryMaker Homes, Texas' longest-standing production home builder that builds exclusively in the Dallas-Fort Worth market. Consistent with our strategy of deepening our share in existing markets, this transaction gives us the scale, land position, and local talent to accelerate our growth in the largest housing market in the country and one that we believe will benefit from solid long-term fundamentals. HistoryMaker also diversifies our product offering given its focus on both the entry-level and move-up markets. While the industry is clearly facing headwinds, our strong balance sheet and land strategy provide us with ample flexibility to navigate the current environment. We remain focused on deepening our share in existing markets through both organic growth and opportunistic acquisitions. Our increased community count within our existing markets gives us a platform to increase scale without significant additions to our overhead structure. I'll now turn the call over to Rob to discuss our strategy, operations, and land position in more detail.

Thank you, Dale, and good afternoon, everyone. We had net orders of 2,284 homes in the quarter. While we saw typical seasonality in our orders in July and August, with July orders softening, followed by an uptick in August, our orders in September were impacted by the approximately 75 basis point increase in mortgage rates as homebuyers became more cautious and affordability continued to weaken. While we experienced a challenging demand environment, our cancellation rate remained low at 14.6% in the third quarter, demonstrating our strict qualification process prior to sales acceptance and the commitment of buyers once they have made the decision to purchase a new home. Our average community count was 339 communities in the third quarter, and we ended the quarter with 343 communities, up 7% versus the prior year and 4% on a sequential basis to a new company record. Our success in increasing our community count has helped mitigate the impact to us of industry-wide slowing absorption levels. We expect to end the year with between 360 and 370 communities, which includes the contribution of 29 communities from HistoryMaker Homes. Additionally, The community count for Century Complete, which accounted for 38% of our third quarter deliveries, increased 9% both sequentially and year over year to 122 communities, the second highest level in its history. This growth is encouraging as Century Complete's business has held up relatively well in the current environment, with gross margins above the company average as it tends to compete more with the used resale market and less with the public home builders given its focus on more secondary locations. We delivered 2,442 homes during the third quarter. As a reminder, approximately 60% of our deliveries are typically sold and closed in the quarter, and so the pressure on our orders this quarter from increasingly higher interest rates clearly weighed on our deliveries. Incentives on our third quarter deliveries averaged approximately 1,300 basis points compared to 1,200 basis points in the second quarter. We expect incentives on closed homes in the fourth quarter of 2026 to be 200 to 250 basis points higher than third quarter levels as we navigate a higher rate environment, muted consumer confidence, and compete with other builders for year-end closings. In the third quarter, adjustable rate mortgages accounted for nearly 35% of the mortgages that we originated by volume of principle, roughly in line with second quarter 2026 levels. Buyers remain quite receptive to arms, and we continue to believe that increased adoption of arms could help partially address the market's affordability challenges. While incentives remain a headwind of margins, our operations continue to perform well in the third quarter. Our direct construction costs on homes we delivered declined by 2% on a sequential basis, and our cycle times averaged 118 calendar days. Given pressures from energy costs and tightening in the trades from heightened immigration enforcement, we expect savings in our direct costs to begin leveling off. Our finished lot costs in the third quarter declined by 3% sequentially. Given the muted sales environment in the third quarter, we decreased our starts by 8% year-over-year and 12% sequentially to 2,502 homes. We ended the third quarter with just over 60,000 owned and controlled lots with, on a year-over-year basis, our owned lots down 8%, but our controlled lot count up 7% as we continue to proactively manage our land positions. As a reminder, our current option lot count of over 27,000 lots is secured by deposits that total just $85 million, or approximately 3% of equity, and we only utilize land banking arrangements on a very limited basis and do not cross-collateralize any deals. Before turning the call over to Scott, I wanted to provide a little more detail on our acquisition of HistoryMaker Homes and the strategy behind it. As Dale mentioned in his remarks, this transaction gives us the scale, land position, and local talent to accelerate our growth in the largest housing market in the country. In its fifth generation, HistoryMaker is highly respected in the DFW market, has land positions that broaden our footprint in the market, and has a strong management team that has joined our Dallas divisions. Consistent with our strategy of increasing depth in existing markets, the transaction will grow our Dallas Division's active communities from 12 to 41 as of September 30, 2026, and triple deliveries from 211 to 669 homes on an LTM basis through the third quarter of 2026. HistoryMaker also serves a wider range of the DFW market through its focus on both entry-level and move-up homes. As part of the transaction, we will also maintain an ongoing contractual relationship with HistoryMaker's sister land development company, which was not acquired in the transaction, but will provide us additional land opportunities in the Dallas-Fort Worth market. While the DFW market and Texas in general are impacted like the rest of the country by elevated interest rates and other macro factors, we believe in the long-term fundamentals of these markets. Dallas continues to benefit from solid household growth that is being supported by corporate relocations, a business-friendly climate, in-migration, employment growth, and relative affordability. As Scott will outline in more detail, we are lowering our guidance for our full year 2026 deliveries and home sales revenues and expect incremental pressure on our fourth quarter gross margins to reflect the impact of an industry-wide slowdown in absorption rates and higher incentives. To help mitigate the impact of these pressures, we are controlling our cost, matching starts with sales, and leveraging our low deposit structures to manage our land pipelines. Additionally, we are continuing to execute on a longer-term strategy of deepening our share in our existing markets to drive improved margins and returns. Our balance sheet remains strong. We have ample liquidity and minimal exposure to off-balance sheet obligations through land banking. I will now turn the call over to Scott to discuss our financial results in more detail.

Thank you, Rob. In the third quarter, pre-tax income was $16 million, and adjusted pre-tax income was 39 million. Net income was 13 million or 44 cents per diluted share and adjusted net income was 29 million or 101 per diluted share, excluding inventory impairment charge and abandonment of lot option contracts. Home sales revenues for the third quarter were 842 million with an average sales price of 345,000. Our ASP in the third quarter was impacted by mix with our Century Complete and Texas segments, the two segments with our lowest ASPs, accounting for 60% of deliveries compared to 56% in the second quarter, 2026, and 52% in the third quarter, 2025. Our deliveries of 2,442 homes decreased 3% sequentially and 2% versus the prior year and continue to benefit from the growth in our community count, mostly offsetting lower absorption rates. Our third quarter 2026 GAAP homebuilding gross margin was 15% while our homebuilding gross margin excluding inventory impairments of $19.6 million was 17.3%. Our adjusted homebuilding gross margin of 19.3% decreased by 70 basis points on a sequential basis with the primary driver of the decrease being higher-end centers. Our inventory impairments reflect pricing decisions related to six underperforming communities with less than a year of future inventory across our Bay Area, Houston, and Florida South markets where we elected to increase absorption and recycle capital. For the fourth quarter, 2026, we expect the most significant driver of our adjusted home building gross margin to continue to be incentives needed to generate an acceptable sales base, which as Rob noted earlier, we currently expect to be $215 to 250 basis points higher than third quarter 2026 levels. SG&A as a percent of home sales revenue was 14.1% in the third quarter. While lower home sales revenue and higher commissions and advertising expense continue to pressure this percentage, we are effectively managing our fixed costs. Assuming the midpoint of our full year 2026 home sales revenue guidance, we expect our SG&A as a percent of home sales revenue to be roughly 14.5% for the full year 2026 with SG&A as a percentage of home sales revenue of 14% for the fourth quarter. We estimate that our fixed G&A expense will account for approximately 70% of our total SG&A at the midpoint of our full year 2026 home sales revenue in SG&A guidance. Given the investments that we have made over the past couple of years, we firmly believe we can meaningfully grow our annual deliveries to 15,000 homes or more without having to add a material amount of fixed G&A, giving us significant leverage to a strengthening new home market. Revenues from financial services were $21 million in the third quarter, and the business generated pre-tax income of $6 million. We expect the contribution margin percent from financial services in the fourth quarter of this year to be similar to third quarter levels. Our tax rate was 20.3% in the third quarter of 2026 and benefited from favorable adjustments associated with additional energy tax credits claimed related to homes closed prior to 2026. We expect our full year tax rate for 2026 to be approximately 26%. We ended the quarter with $2.6 billion in stockholders' equity and $864 million of liquidity. Our third quarter 2026 net homebuilding debt to net capital ratio was 34.9%, and our homebuilding debt to capital ratio was 36.8%. Additionally, at the end of the quarter on September 30th, we amended our revolving line of credit, increasing the capacity to $1.2 billion from $1 billion Thank you for joining us today. to our company record book value per share of $90.61 as of the end of the third quarter. Regarding our capital allocations, given current market conditions, we will prioritize maintaining ample liquidity and are focused on maintaining debt to capital at or below our current levels. Turning to guidance, which includes approximately 100 deliveries from HistoryMaker and reflects the impact of the current environment, We now expect our full-year 2026 home deliveries to range from 9,350 to 9,650 homes and our home sales revenues to be in the range of 3.3 to 3.4 billion. In closing, we are effectively managing our operations in a difficult environment as we position Sentry for future growth as the housing market normalizes. With that, I'll open the line for questions. Operator?

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Min Cho with Texas Capital Bank. Your line is open. Please go ahead.

Thank you. Thank you for taking my question here. First question has to do with HistoryMaker. Sounds like they offer a move up home outside of just your all spec offering. I was just wondering if you're considering adding move up to your portfolio more broadly.

Yes, as a general statement, we are across the board, so not just in DFW where we were able to achieve that with the HistoryMaker transaction, but also in our other markets, we are starting to increase our percentage of move-up.

Okay. And then one of the attractive things about the HistoryMaker acquisition was was pretty similar to the ANGRI acquisition that we did in Houston, which also got us some additional move-up exposure as well. Right.

Okay. Also, you know, it looks like Century Complete fared much better than your other segments, just on a year-over-year basis, even sequentially in terms of orders and deliveries. You know, it sounds like the affordability issues are really impacting the first-time buyers the most. and other home builders had talked about traffic being down specifically in that category, but you still had really good traction there. So can you, is that just the product offering or just the locations? If you could just kind of reconcile those two different thoughts, please.

I think it's all of that. Locationally, first and foremost, There are more secondary locations. They're in employment centers and things like that, but again, not in the bigger cities. And so there's less public pressure with the discounting that's going on with our public peers and some of the larger privates. And so that's where Century Complete has a benefit in the geography that it operates within, is that without that, we're really competing against what we would look at as the used home resale market. and obviously a new home has a lot of benefits for that if we can bring it in at a similar price point. So the product also, the way that is, it's a full offering in terms of there's no options or upgrades in that product but it's well equipped as an entry-level home and we're seeing fairly good demand for that as the market in general is playing out. Okay.

do you offer arms in that for a Century Complete home?

Yes, we do.

You do? Okay. And do you see a higher percentage of arms relative, you know, at Century Complete relative to your other brands? Could that be a reason for the strong demand there still?

You know, Min, it's nothing that is all that significant to the two brands in terms of the mortgage product. selection and offering that consumers are choosing. One of the other dynamics that we do see play itself out currently on the Century Complete is you have a fair amount of exposure to the Midwest within that market. And generally speaking, the Midwest has fared fairly strong compared to maybe some of our other regions. So the Midwest exposure within Century Complete has performed very well as well.

Perfect. Great.

Thank you.

Absolutely. Thank you.

Your next question comes from the line of Rohit Seth with B. Reilly. Your line is open. Please go ahead.

Rohit Seth Hi. Thanks for taking my question. Just on the incentive composition, of the 200 and 250 basis points and further step up in incentives, how much is rate buy-down costs versus any price cuts? Is the increase kind of broad-based, or is it concentrated in the west or southeast orders more particularly?

Yeah, Rohit, we've experienced over the last six or eight quarters a pretty consistent split of our incentives really trending about 60% towards price, 40%. towards the mortgage side. Generally speaking, we would expect that within the 200 and 250 basis point guide to continue. Obviously, with rates being higher in some of the additional support from an affordability perspective, our consumers, potentially it's a little bit more heavily weighed towards the mortgage side in Q4, but generally likely a pretty similar split. And then in terms of regions, Generally speaking, I think from our buyer profile, the recent rise that we've seen in interest rates has been pretty consistent across our portfolio. So I wouldn't necessarily call out any one region going forward from that guide being a bigger driver or other of that increased incentives.

All right, thank you. And then just to follow up, you said this, you know, September trends continued into October. I'm just wondering if you can quantify either by absorption, you know, what the pace was like in October versus September.

Yeah, nothing, nothing specific that I think we want to quantify at this point. Everything we're quite done with October as is and we're were pretty focused on ending the month strong. One item that was in our prepared remarks and I think is pretty apparent from the rate movement is we did see a fairly significant change from a buyer hesitancy and a lack of consumer confidence occur in September. I think you can look at our absorption rates for the quarter. September is typically a stronger month within the quarter. and imply a little bit of how that proceeded throughout the quarter. But so far, October's behaved fairly similar to September.

Okay. You know, rates did come down a little bit from the top. Was there any buyers coming back and anything like that?

You know, there was a little positive energy in our sales offices when the rates came down a little bit. but you know this has just happened you know very recently so it's hard to say if that's going to be a trend or not.

All right thank you.

Your next question comes from the line of Jay McCandless with Citizens JMP. Your line is open please go ahead.

Hey guys thanks for taking the questions. The first one I had based on where the 3Q backlog was and the new guidance for closings. Looks like y'all are intending to sell and close about 1,300 homes to get to that midpoint. I guess with conditions as rough as they are, what gives you the confidence that you can sell and close that many homes in a seasonally weak quarter?

Yeah, Jamie, there's a handful of items, obviously, that go into the guide, not just what we typically sell in closed during a quarter, but where we see our current inventory and the amount of opportunities that we have. I think we've generally started a number of homes throughout the year that we feel like we've got a fair amount of opportunities for which to sell into and to hit the midpoint of the guide.

OK. And then the second question I had, it was encouraging to hear you guys talk about a declining lot cost. I think you said it was down 3%. Is that a trend that can continue into fourth quarter and into 27 and help offset some of this other direct cost pressure you talked about?

Yeah, Jay, I think we're very pleased with where our lot cost is trending. There's various different ways, obviously, to play the land market. One of the areas that we've been pretty focused on is maybe a little bit more of a traditional lower deposit play in terms of how we're locking up our control pipeline. We think this gives us a fair amount of flexibility, not just from go-forward timing, but also terms, and we do think we're having some success, and that is starting to flow through the P&L. So we're optimistic that that trend will continue. Obviously, the land side is ever-evolving, and it continues to be competitive, but we're very pleased with where that's been, and we certainly hope that's a driver as we get into future periods.

And then the next question I had, that sounds like Complete is doing very well versus Resale Competition, but several of your competitors have called out in this earnings cycle that they're seeing a lot of pressure from existing homes. Are you guys feeling that anywhere and any reasons you might want to call out? And I guess as part of that discussion, are you seeing your competitors bring on extra inventory trying to clear some extra homes ahead of year-end?

Well, I think we always have that in the home building environment where Q4, you know, people are looking at their inventory and if it's built up a little bit, they want to move it out and start the year fresh. So there's always a little more competition, it appears like, in Q4. You know, that's one of the reasons we've guided that we may have 200 to 250 basis points increase in incentives just because there is going to be more competition that way. As far as any market, we call out that we're really having pressure from existing used homes. There's nothing that comes to mind, Jay. Of course, you can have that in subdivision by subdivision in terms of proximity and kind of where your price, what your product is and all that. But there's nothing that would come to mind that says this particular market is having challenges as it relates to competing with resale homes.

Okay, let's all head. Thanks, guys. Thanks, Jay. Thanks, Jay.

Your next question comes from the line of Alan Ratner with Zellman. Your line is open. Please go ahead.

Hey, guys. Good afternoon. Thanks for all the detail. Question on just kind of your view of the elasticity of demand right now. We've heard from some other builders. They have a view that given the combination of how quickly rates have moved as well as the fact that we're in a seasonally slower time of year, they feel like throwing more incentives at the buyer really does not achieve the desired sales results that maybe you would expect or hope for. You obviously seem to be taking a different approach by increasing incentives here. Can you talk a little bit about where you see the elasticity? Is it a situation where you feel like you still have a decent pipeline of interested buyers and you need these incentives to either get them to qualify or pull the trigger? or is this more in an effort to attract more traffic because traffic has waned here?

Alan, it's a great question and certainly one that I think that we talk about a lot. It's been a fair amount of time talking about it. If you go back a year or so ago, I think we all felt like there was a pretty direct correlation between some of the additional incentives in the amount of absorptions that we were able to get for it. As we look at it today, listen, I think for our buyer profile, affordability continues to be the main concern. We are generally dealing with a buyer that is looking for a home out of some level of need. And so I think for our buyer profile, there likely is a little bit more elasticity than maybe some of our peers that have the ability to wait. We do see that it continues to be there, maybe not to the extent that it was last year, but we absolutely, as we continue to solve the affordability equation for our buyers and provide them with a home that meets really the monthly payment that they're looking for, we are able to get them off of that final decision point. One item that is certainly very prevalent with our buyer profile, obviously, is the volatility in rates, not just the rate themselves. We are optimistic that as some of the volatility in the 10-year has settled down over the last couple of weeks, that buyers will come back that maybe put their buying choice on pause.

I appreciate the thoughts there. Second question, if I look at the balance sheet, you have had an increase in leverage, about $500 million since the beginning of the year. And I know part of that's funding the share repurchase activity, which slowed but still had some buyback there this quarter. I'm just curious, if cash remains kind of in negative territory here for the foreseeable future, Are you still committed to continuing to borrow to fund repurchase activity, recognizing where your stock is trading? Or are you thinking maybe of shifting the strategy to preserve some cash and kind of pay down some of that debt that you recently took out?

Yeah, Alan, great question. So from an overall capital allocation priority perspective, we have in our prepared remarks, I think currently we're prioritizing keeping the debt to cap fairly consistent to down from where we're at right now at Q3. I think we have the ability with how we have structured the land side of the equation to certainly give ourselves a fair amount of flexibility in when and how we do our capital allocations back into the business. So I think our first priority going forward will really be to make sure that we're focused on the debt to cap. If that presents itself an opportunity to continue to do share repurchases at opportunistic levels, given kind of that overall governor, we certainly will look to do it. But from a prioritization standpoint, I think as we look over the next couple quarters, you'll certainly see us work that dollar amount down.

Appreciate it. Thanks a lot, guys. Thanks, Alan.

Your next question comes from the line of Alex Barron with Housing Research Center. Your line is open. Please go ahead.

Good afternoon, gentlemen. I wanted to drill down a little bit on the acquisition I wanted to know, did you guys fund that just with cash on hand? Did you raise some debt? And then as far as motivations for you guys to buy it and for them to sell, if you could just discuss that a little bit as well as what are some of the metrics of how you guys consider buying these builders? Is it book value? Is it outlook on revenues or some of those discussions, if you could?

Yeah, so let me give you a handful of thoughts. So just from a funding, we have a revolving credit facility that we just extended the maturity on two years and also increased the capacity to a billion two. Very, very efficient form of capital for us. So the acquisition itself was funded based off of proceeds from our revolving credit facility. So all cash, but proceeds came from there. How we look at acquisitions generally at Center, I think you're aware we have a long history of very successful acquisitions. It's something we pride ourselves on and think that we're quite good at, quite frankly. This is the 10th one that we've done since we've gone public in 2014. You're seeing a little bit of a new strategy from us as it's evolved itself over the last three. We're really focused on on bolt-on acquisitions in our existing markets in order to drive that scale and that leverage. So the last three that we did were an acquisition in Nashville, Tennessee, one in Houston, and then this one here in Dallas. We think the ability to drive scale and drive a lot of that local knowledge, local land resources, as well as leverage from the G&A side is something that we're excited about, and I think from a longer-term perspective. perspective makes a lot of sense. From an evaluation perspective, I don't think we're going to do any specifics here. I can say I think it was an attractive win-win for both parties. We're very, very excited about an ongoing relationship that we have with this sister development company for HistoryMaker. This allows us to leverage some really long history of local Relationships and Resources in terms of bringing land to market for us. And we're very excited that that would be accretive for both parties going forward. And then from a bigger picture standpoint, I think as the market gets more difficult and certainly the consumer gets tighter. It becomes a little bit more difficult for private builders really across the environment to continue to be competitive. So, I think this is a little bit of a case study of acquisitions that we think we'll have the opportunity to execute on going forward.

All right. Thank you so much.

Absolutely.

If you would like to ask a question, please press star 1 to raise your hand at this time. We ask that you pick up your handset when asking a question to allow for optimum sound quality. Please stand by while we compile the roster. There are no further questions at this time. I will now turn the call back to Rob for some closing remarks.

Thank you. To everyone on the call, thank you for your time today and interest in Century Communities. To our team members, including our newest from HistoryMaker Homes, thank you for your hard work, dedication to Century, and commitment to our valued homebuyers.

This concludes today's call. Thank you for attending. You may now disconnect.