John Kolstoe - VP, Finance Dale Francescon - Chairman and Co-CEO Robert Francescon - Co-Chief Executive Officer David Messenger - CFO.

Michael Rehaut - JPMorgan Jay McCanless - Sterne Agee Rob Hansen - Deutsche Bank Patrick Keeley - FBR.

Greetings and welcome to the Century Communities Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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 your host Mr. John Kolstoe. Thank you. You may now begin.

Good afternoon. We would like to thank you for joining us today for Century Communities second quarter 2015 earnings conference call. After the market closed today, we distributed a press release detailing our second quarter 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 is 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'll turn the call over to Dale..

Thank you, John. Today on the call I'll review our operating highlights. Rob will then discuss our homebuilding markets. Afterwards, Dave will follow up with further details on our financial results and balance sheet. After our prepared remarks, we will open the lines for questions.

During the past two years we have scaled our business into attractive markets and deployed our capital opportunistically to generate value for our shareholders. We took out Company public in June 2014, as one of the top five fastest growing homebuilders in the country and we are now a top 25 homebuilder.

Even with all our past accomplishments, our company is still in the early innings of its growth cycle. We entered 2015 with a goal for the full year to more than double our home sales revenues and home deliveries, while opening additional communities and improving our profitability.

Year-to-date we have achieved record results, sold and delivered more homes than we did in the entire year 2014 and are well on our way to accomplishing our goals and delivering another consecutive year of profitability.

The strong momentum in our business was evident during the second quarter in which we improved our earnings to $0.46 per share or an increase of 53% compared to a year ago.

We executed well against all of our core objectives, to grow our home sales revenues by 142% to $186.8 million and our deliveries by 221% to 636 homes both of which was the highest in the company's history.

This improvement was largely driven by demand across our growing number of new and existing communities, and also our successful expansion in the new markets. All of our comparable markets contributed to our growth led by Colorado and we experienced a healthy pace of activity at our most recently acquired southeast operations.

We achieved this growth while also maintaining our sequential progress on our homebuilding gross margin percentage and further reducing our SG&A as a percent of home sales revenues compared to a year ago.

Looking more closely at our metrics, the more than three-fold increase in our deliveries to 636 homes versus 198 a year ago drove the significant improvement in our revenues and nearly doubled our homebuilding gross margin dollars to 36.6 million.

Our adjusted homebuilding gross margin percentage was 21.3% which was roughly stable sequentially compared to the first quarter of 2015 and inline with our expectations.

We made further progress on managing our SG&A which is a percentage of home sales revenues improved to 12.2% compared to 14.6% in the prior year quarter and 13.6% in the first quarter 2015.

In summary we are pleased with this results which we believe reflect the success of our multi market growth strategy, the efficient structure of our scalable platform and the hard work and dedication of the entire Century Communities team.

Into the second half of 2015, we are excited by our prospects to further expand our operations, improve our profitability and meet our expectations for the full year 2015. Looking beyond the current year we are very optimistic on the long term opportunity for our business with our existing platform supported by improving housing markets.

Our company is well positioned to continue improving its profitability, growing earnings and investing capital opportunistically to further diversify our footprint and enhance our returns. I would now like to turn the call over to Rob, to discuss our markets in greater detail..

Thank you, Dale and good afternoon everyone. We continue to build our company into a premier homebuilder in our new and existing markets. We are actively pursuing additional growth opportunities while broadening our operations within our markets to bring our platform and capital strength to bear.

Our recently completed successful $60 million debt offering and expansion of our unsecured credit facility provide us with an attractive source of capital and additional flexibility to accomplish our growth objectives.

During the second quarter, we executed a record setting 718 net new contracts compared to 281 net new contracts in the prior year quarter, which represented an increase of 156%. This growth was held by an increase in our average open communities by 175% to 88 communities compared to the prior year quarter.

This improvement resulted in a record 1005 homes and backlog with the dollar value of 348 million representing considerable growth compared to 394 homes with the dollar value of 168 million in the same period a year ago.

Looking at our markets, we continue to benefit from sound, long term fundamentals including rising employment and favorable population growth amid a limited supply of new homes. We are capitalizing on these favorable trends as we open additional communities, introduce new homes and tailor our amenities to our local buyer preferences.

In Atlanta which comprises our Southeast operations, this platform is positioned to be a meaningful contributor to our results for the full year 2015. Atlanta represented 41% of our currently owned and controlled lots in the second quarter compared to 30% in the first quarter and 21% at year end.

We continue to build backlog in this market and year-to-date in 2015 our investment has continued to meet or exceed our acquisition underwriting assumptions.

In Colorado, our market dynamics remained strong despite the weather and trade challenges the market experienced and this was evident in our deliveries at 64% in our net new contract up 44% on a year-over-year basis. Additionally, we increased our average selling price by 3% on a sequential basis compared to the first quarter of 2015.

In the second quarter we opened three new communities in Colorado as we continue to capitalize on the strength of this market. In Las Vegas we are growing our deliveries and extending our market position. We have experienced steady improvement in our backlog units throughout the year and are now gaining favorable traction in our backlog ASPs.

This positive momentum gives us further confidence in the attractive long term dynamics of the Las Vegas platform. Our overall Texas markets ended the second quarter with a combined backlog increasing to 194 homes with an ASP of 405,165.

This growth was led by our Central Texas division comprised of Austin and San Antonio which achieved growth in net new contracts and deliveries of 32% and 20% respectively even as demand and traffic eased somewhat. Specifically the market experienced some moderation as the quarter progressed mainly at the higher price points.

In Houston, which is our smallest platform representing approximately 5% of our backlog dollar volume, the softening we previously mentioned during the first quarter call persisted through the second quarter.

We expect our ASPs in Texas to continue to fluctuate from quarter-to-quarter based on product mix and while we experience near term slowing, we still remain encouraged by the long term prospects in all of our Texas markets.

Beyond our existing footprint, we continue to review potential acquisitions of homebuilders in target markets which share a number of favorable attributes including job growth, increase in household formations, limited housing supply and favorable home price outlooks.

We have a proven track record of accretive acquisitions as a results of our disciplined underwriting standards and strict controls to maximize our returns and we expect M&A activity continue to drive a portion of our accretive growth moving forward as we look to expand within and beyond our current markets.

In addition to platform and market expansion, we continue to broaden our presence within our core market by sourcing additional attractive land parcels. In the second quarter we acquired 911 lots for $33.7 million to end the quarter with an inventory of 13,288 owned and control lots in some of the strongest housing markets in the country.

Looking across all of our markets, our attractive land positions provide a visible pipeline of potential organic growth through 2018 and beyond. In summary, we are pleased with our overall progress during the second quarter and we remain focused on sourcing value enhancing opportunities to generate additional returns for shareholders.

We ended the second half of 2015 with a solid balance sheet to support our strategic capital deployment efforts and we are now better positioned to further extend our footprint in new and existing markets with improving economies. I will now turn the call over to Dave, who will provide greater detail on our financial results for the second quarter..

Thank you, Rob. In the second quarter we continue to increase our deliveries at an exceptional pace, while growing our profitability and strengthening our balance sheet for further expansion.

For the second quarter our net income improved $9.8 million representing an increase of 84% compared to $5.3 million in the same quarter last year largely reflecting higher home deliveries and favorable G&A leverage. Adjusted EBITDA for the second quarter was $19 million up 87% compared to $10.1 million in the second quarter of 2014.

Home sales revenues for the second quarter were $186.8 million, an increase of 142% compared to $77.3 million in the prior year's quarter. This improvement in revenues was driven by a 221% increase in home closings to 636%, mainly attributable to the expansion of our platform over the past year.

The growth in the number of closing year-over-year was partially offset by the average sales price of $293,722 on the homes we delivered in the quarter which was higher than compared to the $284,751 in the first quarter of 2015 and different $390,545 during the prior year's quarter, mainly the result of a change in our regional and product mix from our expanding market presence primarily into the Southeast.

We achieved another quarter of improvement in SG&A as a percent of revenue to 12.2% compared to 13.6% in the first quarter of 2015 and 14.6% in the prior year quarter, as our higher home sales revenue and the successful integration of our regional platforms more than offset the higher personnel cost and additional investment to support a higher number of communities.

Gross margin percentage on homes closed in the second quarter was 19.6% compared to 24.7% in the second quarter of 2014 largely as a result of the shift in regional and product mix I mentioned earlier.

Excluding capitalized interest, and purchased accounting impacts from cost to sales, our adjusted gross margin percentage in the quarter was stable sequentially at 21.3% versus 26.5% in the same period in the prior year's quarter. Turning now to our balance sheet and liquidity.

In April, we successfully completed an offering of an additional $60 million or 6% and 7%, 8% senior notes due 2022. We used the proceeds to primarily repay $55 million of outstanding balances under our line of credit. We ended the second quarter with $32.6 million in cash and cash equivalents.

And we had total inventories of $661.7 million and total assets of $781.1 million. Our total liabilities were $398 million, including debt of $304.5 million. Subsequent to the end of the quarter in July, we successfully expanded our unsecured credit facility to $200 million with a $100 million accordion feature.

On a pro forma basis as of June 30, our total liquidity is $193 million including $150 million of availability on our credit facility prior to the exercise of the $100 million accordion feature. We believe our balance sheet and capital resources strongly position us to continue investing in attractive land parcels, and pursuing targeted acquisitions.

In closing, we’re encouraged by our first half results. As we look to the second half of the year we anticipate this positive trend to continue and similar to our historical results, we expect our fourth quarter to be our strongest.

This is especially true this year given the range in Colorado and Texas during the second quarter, which may impact our third quarter results. That being said, we are increasing our full year 2015 outlook and expect deliveries to be in the range of 2200 to 2600 and home sales revenues to be in the range of $700 million to $800 million.

We continue to expect our active selling community count to be between 80 to 90 communities at year end. We’re firmly divisions to realize another solid year of continued profitability and improvement in our business. We look forward to updating you on our progress next quarter. Operator, can you please open the lines to Q&A..

[Operator Instructions] And our first question comes from the line of Michael Rehaut with JPMorgan. Please proceed with your question..

Thanks good afternoon everyone.

First question I had was on the guidance, obviously raising the closings and I presume that the primary driver of the raised revenue outlook as well, I was wondering if you could give us a sense of where that's coming from if it’s just better backlog conversion or better than expected sales pace or if it’s across the board or if they are still in markets that are just coming together a little better than you expected?.

This is Dave. I would say the combination of variety of factors. When we were putting out the guidance, January and February trying to look out over the course of the year, we had expected the absorptions of about 2.2 as what we had modeled then for that guidance. We're seeing absorptions coming a little bit better than that.

Throughout each quarter we are seeing some markets. Colorado, Atlanta, having some very positive closings backlog conversion.

And then on top of that as we get into the second half of the year here, we think our outlook for the second half was a little bit different that it’s been the last two years where the second half completely fell of the face of the earth. So I would say it’s a combination of a variety of factors that led us to the increased guidance..

Okay. And I appreciate that, and I guess also as part of guidance gross margins x purchase accounting like you said pretty stable sequentially, any thoughts in terms of the back half, should we expect kind of a similar number in the 21 to 21.5 range or should that or that perhaps improve a little bit, any directional guidance there will be helpful..

I would say that we are forecasting only on price somewhere to 21% to 21.5% range. We don’t have exact number it obviously depends on mix and markets that come through. But as we said when we put our guidance initially in February, we thought it would be in that range and the first quarter were 21.5, were 21.3 the second quarter.

So I think that that’s a good number to use going forward for the second half of the year..

Okay, no thanks. And just lastly on the sales pace in terms of the orders. In the first quarter you did 8.3 per community for the quarter and that was up actually solidly year-over-year versus 7 a year ago.

Obviously the mix has changed a lot, and I think that obviously effects a lot of your metrics, but you did have some good improvement year-over-year obviously mix not withstanding or mix included in that or driving that.

Looking at the second quarter this past quarter, it was down solidly year-over-year and it was flat sequentially as well whereas typically sales pace or as equal does improve a little bit sequentially 1Q to 2Q.

So I was wondering if you could speak to what's going on there if there were any particular drivers, any areas of where that you did perhaps see a little bit of fall off year-over-year?.

Michael this is Dave again. I was telling, from the first quarter to second quarter we are roughly flat as I am looking at it from a consolidated on a monthly basis 2.8 to 2.7 rounding. So, marginal differences there.

And then I would say when we looked at the first - the second quarter of 2014, we had a couple of markers with little bit of a faster pace in Colorado compared to where we were this year. But I don’t think that we read into that as any kind of slowing in the marketplace, it was just attributable to maybe an anomaly in 2014 versus 2015..

Okay. All right, thanks guys. Appreciate it..

Thank you..

Thank you. And our next question comes from the line of Jay McCanless with Sterne Agee. Please proceed with your question..

Hi, good afternoon everyone. First question I had on the weather you discussed that the rains may have slowed things down a little bit.

Should we expect closings maybe to tail off a little bit in 3Q and then rebound in 4Q, and do you expect any closings or have to push into 2016?.

Hi Jay, this is Dave.

I would say that moving closings from the third quarter to fourth quarter is a good assumption, that when we look at the second quarter in Colorado we missed about 75 days to pour concrete, and Texas we missed on average about 70 days to pour concrete, so that definitely was impacting getting home started that we had sold, so that will slow down in Q3 closings and push them into Q4.

Right now as we're looking out 12 months and looking at 16 business plan, and getting our arms around that, if there are closings being pushed from 2015 to 2016, I don’t think it materially impact our numbers..

And then the other question I had, any commentary you can give us on July so far or whatever you guys have collected on July?.

Sure. July has slowed a little bit, but that's not unusual from a seasonality basis. So, when we look at July and we look at the first few days of August, there is nothing that we're seeing that is appreciably different than what we anticipated..

Okay, great. Thanks for taking my questions..

Thanks, Jay..

Thank you. Our next question comes from the line of Nishu Sood with Deutsche Bank. Please proceed with your question..

Hi guys, this is Rob Hansen on for Nishu.

So the first question I had was, have you run kind of an analysis where you look at the impact of losing the 75 days in Colorado and Texas and kind of what that did - what that kind of does for your closings? I'm just kind of thinking about in terms of, you moved the midpoint up by 7% I think for closings, right? So, had you not had any of these extraneous weather factors, what would that kind of look like?.

This is Dave. I think that when we look at our construction cycle, and look at the impact weather had on Texas and Colorado in the second quarter, it really is a - the result of that weather and delays in pouring moves construction starts from the second and third quarter than closings from the third to fourth.

On an overall basis in the second half of the year, I don't know that it materially changes what our guidance numbers are..

Got it, okay.

And then just another kind of question on the guidance, I'm sure you have your own kind of internal projections for operating margins, right? You increased the midpoint of closings by 7%, revenues are only up 3% right? So there is probably some mix effects there where you're probably getting more closings than Atlanta, you kind of threw out that 21.5% gross margin level in Mike's question.

So kind of thinking about that, is that still kind of in-line with what you were kind of originally thinking? And does the order the mix impact kind of decrease that but your operating margin would end up still being higher because you have a higher leverage and higher closings in the back half?.

I would say that we haven't given operating margin guidance, we're not getting to that level of detail on the income statement. But the way we look at it is that we've been able to increase our closings, increase our revenue dollars and yes makes us [indiscernible].

You can see that at the midpoint of our original guidance, our ASP was 3.22, revised guidance is 3.13 as a result of shifting product mix in the markets, and at the same time our ultimate goal here is profitability and shareholder value.

So while we are increasing revenue, we are always looking to find ways to be moving that gross margin dollar increasing SG&A leverage and ultimately improving the operating margin line items..

Got it, okay. And the last one just on acquisitions - you mentioned in the press release and in the script too. Do you have anything kind of in the pipeline that's kind of close to possibly happening and I would assume there's probably kind of smaller one off transactions where you would enter new markets, I think you indicated that.

So any kind of further detail on in terms of an update on the acquisition pipeline?.

We appreciate that question but I hope you can appreciate for competitive reasons, that's not something that we can answer.

But one comment that we would make is that, we have continued to explore a variety of opportunities and the last acquisition, we did was closed in last November and the fact that we've taken a pause was not intentional, we continue to look at opportunities, but there needs to be fit geographically, culturally and economically, and so, from that standpoint, it's really given us a time that we've been able to pretty much complete the integration of the acquisitions that we have done and we're looking forward for our next transaction..

Great. I appreciate the color guys..

[Operator Instructions] And our next question comes from the line of Patrick Keeley with FBR. Please proceed with your question..

Good afternoon guys, thanks for having me on. So maybe kind of looking at the other side of the coin, when I think about capital allocation for you guys kind of growing in your core markets now.

How should we think about that being distributed between markets? Obviously you guys have grown very quickly in Atlanta on a lot basis, so should we continue to expect acquisitions more focused on Atlanta or do you think at this point it's going to be more broad-based?.

As you mentioned, Patrick, we have grown Atlanta quite significantly. When we completed the original acquisition there, we had just over 2,000 lots, now we as of June 30, own or control almost 5,500 lots in that market. So, 2.5 times delta from when we started.

With that said, we are opportunistic and we are looking to put capital in the markets if we think we can get the best return. And we're going to continue evaluate that as we go forward. So I wouldn't just single out Atlanta, but I would look at all of our markets for where we think we can get the best return..

Great, very helpful.

And then also again, maybe going back to acquisitions and maybe just thinking broader, with the kind of the growth that you have seen in Atlanta on maybe a little bit lower price point, but higher term product, when you guys look out at potential targets, are you looking at kind of price point and type of products there or is there any one you are focusing on or is it much more along the line of just return based, albeit kind of higher end builder or more lower end high return?.

Every opportunity is somewhat unique and every opportunity has pluses and minuses.

So there is really not one aspect that we look at, it's really a function of looking at the entirety of the opportunity, and as I mentioned earlier, there has to be a cultural fit, there has to be a geographical market that we want, and then importantly where our lot of deals breakdown is it has to be economically feasible and so you look at it, it's a variety of factors, not anyone particular one..

Great. Thanks guys..

Thank you. There are no other questions in the queue at this time. We would now like to turn the call back over the Management for any closing comments..

Thank you, operator and thank you again everyone for joining us today. We look forward to speaking with you again next quarter..

Thank you. This does conclude today's teleconference. You may disconnect your lines this time and we thank all of you for your participation..