Scott Dixon - VP, Accounting Dale Francescon - Chairman and Co-CEO Rob Francescon - Co-CEO Dave Messenger - CFO.

Jay McCanless - Wedbush Tim Daley - Deutsche Bank Will Randall - Citigroup Michael Rehaut - JPMorgan Alex Rygiel - FBR Alex Barron - Housing Research Center.

Greetings and welcome to the Century Communities Third Quarter 2016 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 Scott Dixon, Vice President of Accounting. Thank you Mr. Dixon, you may now begin..

Good afternoon. We would like to thank you for joining us today for Century Communities third quarter 2016 earnings conference call. After the market closed today, we distributed a press release detailing our third quarter financial results, which can be found in the Investor Relations section of our Web site 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'll 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 and balance sheet. Following our prepared remarks, we will open the lines for questions. We are pleased with our business execution year-to-date.

We are on track to deliver another year of record profits with earnings of $34.5 million or $1.63 per share for the first nine months of 2016. Our 2016 year-to-date performance highlights the organic growth we have been able to achieve as a result of the integration of our acquired assets which began in 2015 and continued into this year.

Our strategy of offering a diversified choice of product offerings designed to appeal to a wide range of potential buyers in our specifically targeted geographic markets continues to generate significant expansion in virtually all metrics including deliveries, revenues and net new contracts.

During the third quarter of 2016 home deliveries increased 22% to 706 homes. Home sales revenue improved 38% to $248.1 million and net new contracts grew 32% to 628 homes. We're pleased with this collective progress and the balanced contribution from all of our major markets during the quarter.

This broad demand was very encouraging and further supported by our average selling price up 13%, reflecting favorable product mix and core price momentum. Based on all these favorable dynamics, we ended the quarter with a reinforced view that the overall homebuilding environment remains poised for a long-tailed steady recovery.

On the yields of good top line momentum, we drove a 33% increase in adjusted EBITDA to a record $26.4 million during the third quarter of 2016. This improvement reflects our efforts to carefully balance growth and cost in order to maximize profits and shareholder returns. To that end we increased adjusted gross margin by 36% to $55.7 million.

Our adjusted gross margin percentage was 22.5% versus 22.8% in the prior-year quarter due to geographical and product mix. However on a sequential basis, the adjusted gross margin increased from the 21.1% achieved in the second quarter of this year.

Excluding the mix impact, the strength of our multimarket approach and diversified footprint continues to foster margin stability for Century. This reflects a consistent track record of strategic land purchases, strict underwriting standards, tightly run operations and the impact of our attractive markets.

We experienced healthy demand trends in the third quarter of 2016 with our absorption pace improving by 15% to an average 2.3 net contracts per month versus 2.0 in the prior-year quarter.

Our ongoing focus on offering diverse product types and price point helped us in the quarter with a very strong backlog up 17.2% in dollars which positions us well into the final quarter of 2016. During the quarter we formed a new wholly-owned financial services division to provide title and mortgage services to our home buyers.

This division is aligned with our objective to diversify into ancillary businesses that can generate incremental value for our shareholders. After an initial ramp up period through this title and financing arm, we will be able to generate an attractive return from a stable and value-add service to our home buyers.

Looking forward we remain on path to grow our business and leverage our cost base to deliver another full year of expanded profits. The macro environment is favorable in most of our markets and the long-term trajectory for housing is encouraging.

The continuation of our growth is well underway for 2016 with a strong pipeline of communities, a deep land portfolio, and ample capital resources to further increase our base of activity in a disciplined manner.

We're very focused on creating an even stronger foundation for Century and we will continue to invest time, energy and capital to advance our goal of building Century into the most profitable amongst its peers. I'd now like to turn the call over to Rob to discuss our markets in greater detail..

Thank you, Dale, and good afternoon everyone. During the third quarter our momentum was very encouraging with net new contracts, home deliveries and prices improving in nearly every served market.

Notably our progress during 2016 has been entirely organic and a reflection of our disciplined efforts to expand operations into excellent markets with sound long term fundamentals. During 2013 and 2014 we rapidly scaled our operations through strategic acquisitions.

In 2015 we focused our efforts on integrating those acquired assets and in 2016 year-to-date we have reaped significant benefits from our scalable and more diverse business. We ended the quarter with a deep backlog of 992 homes with a dollar value up 17.2% to $381 million.

ASP and backlog improved by 6.8% over the same period with prices moving higher in each region reflecting the success of our new communities and product offerings. The number of new orders rose 32% to 628 homes with Central Texas and Nevada up more than double.

We continue to source additional land parcels that meet our disciplined underwriting requirements. In the third quarter we acquired 647 lots for $29.2 million. We ended the quarter with the land inventory up 23% to 17,203 owned and controlled lots which provides us with a visible pipeline of organic growth for many years to come.

Looking at our portfolio of markets, as of October 2016 overall conditions are favorable. In Atlanta demand for homes at our average price points which are below 300,000 remains at expansion mode.

Our net new home contracts and home deliveries increased 14.2% and 10.8% respectively over the prior year quarter while our ASP on closed homes has increased 21.5%. The job market is strong and resell supply is limited which is producing good homebuilding conditions.

We continue to target entry level and move up buyers through diversified product offerings. In Colorado and Utah new communities in these markets are holding steady or seen an uptick in demand and pricing.

The employment bases are expanding and supply is constrained providing us with good opportunities to capture demand with our strong pipeline of new communities. In Colorado labor constraints continue to exist at some communities but we are finding cost savings initiatives to help offset any labor inflation.

In Utah we entered that market in the second quarter and have sensed more than doubled our land position to over 1200 lots as we continue to strengthen our presence there. In Las Vegas traffic and sales remain solid with our communities experiencing strong buyer demand.

We have doubled our communities in that market over the past year and orders increased 122% in the third quarter. Continued business growth and visitor growth are supporting new jobs which are outpacing an increase in residential permitting activity.

In Texas both San Antonio and Austin had a strong quarter of growth in net new home contracts and home deliveries. In Austin in particular tech job growth continues and supports new home sales and the balance supply.

In Houston we are altering our product mix with an eye on lower price points to generate better returns and are seeing attractive investment opportunities as evidenced by our increased lot counts. In summary, most of our markets are experiencing favorable homebuilding conditions.

As always we remain committed to entering markets with attractive long-term fundamentals, strengthening our current market positions and supporting our growth initiatives with a prudently leverage balance sheet.

Our preferred market attributes include job growth, increasing household formations, limited housing supply and positive home price outlooks consistent with our current footprint.

Beyond these markets we have ample liquidity to further support the execution of our effective growth strategy, improve our margin profile, and enhance stability in our quarterly performance. I will now turn the call over to Dave who will provide greater detail on our financial results for the third quarter..

Thank you, Rob. During the third quarter the expansion of our homebuilding operations and improving returns on our assets helped us to produce a 26% increase in net income to $13.3 million or $0.63 per share compared to $10.6 million or $0.50 per share in the prior year quarter.

For the third quarter, our pretax income was $19.7 million, an increase of 24% year-over-year. Adjusted EBITDA grew 33% to $26.4 million compared to $19.99 in the prior year quarter attributable to our revenue growth. Home sales revenues for the third quarter were $248.1 million an increase of 38% compared to $179.8 million in the prior year quarter.

This improvement in revenues was mainly driven by a 22% increase in home deliveries to 706 at higher average selling prices which increased to $351,400 in the third quarter of 2016 compared to $311,000 in the prior quarter largely due to a favorable shift in regional and product mix from our communities.

Gross margin percentage on homes closed in the third quarter was 20.3% compared to 19.2% in the second quarter of this year and 21.3% in the prior year quarter.

Excluding capitalized interest and purchase accounting impacts from cost of sales, our adjusted gross margin percentage in the quarter decreased slightly to 22.5% versus 22.8% in the prior quarter but increased 140 basis points compared to the second quarter of 2016.

SG&A as a percentage of home sales revenues was essentially stable at 12.5% compared to 12.3% in the prior-year quarter. The 20 basis point difference was attributable to slightly higher selling transaction costs. We will continue to review our properties and cost structures to gain additional leverage on SG&A as we progress through the year.

In regards to our financing operations, we've begun hiring people and started the licensing process for Inspire Home Loans our new mortgage agency.

Given the lead time necessary for hiring loan officers, licensing and taking applications, we expect to begin closing loans in the second quarter but don’t expect to generate profits until the third quarter of 2017. Turning to our balance sheet and liquidity.

In 2016 we expanded our senior unsecured credit facility to $380 million at an unchanged interest rate of LIBOR plus a spread of 2.75% to 3.25%. The term of the credit facility was extended by one year to mature in October 2019.

As of September 30, we have over $235 million of total liquidity including $190 million of availability on our $380 million revolver. We believe our balance sheet and capital resources firmly position us to continue pursuing attractive transactions and other value enhancing opportunities. Moving to our 2016 outlook.

Most of our housing markets continue to be supported by positive fundamentals including job gains, new household formations and strengthening regional economies. We remain confident about the prospects for continued expansion and our increasingly diversified footprint enhances the stability of our growth and margin profile.

As we move into the fourth quarter, we now expect 2016 deliveries to be in a range of 2700 to 2900 closings and home sales revenues to be in a range of $900 million to $1 billion. We continue to expect our ending selling community account to be in a range of 85 to 90. We look forward to updating you on our progress next quarter.

Now I'd like to turn the call back over to Dale..

Today we announced our purchase of 50% of Wade Jurney homes which targets first time buyers of homes in the Carolinas, Florida and Georgia. Wade Jurney was ranked last year as the 60th largest homebuilder nationally and the fastest growing private builder by Builder magazine.

For the trailing 12 month period ending September 30, 2016, Wade Jurney closed 1060 homes generating $148.2 million in revenue. Additionally as of September 30, 2016 Wade Jurney owned or controlled 3949 lots and had 309 homes in backlog representing a value of $42.7 million.

By partnering with Wade Jurney we are able to leverage its unique business model which requires less capital investment, yet yields quicker asset turns. Given the demonstrated success of this brand coupled with the immense opportunity in the entry-level market, we intend to grow this brand and expand it into additional markets.

We now have a much broader position in the rapidly growing Southeast, as well as greater exposure to first time buyers within our portfolio. From an accounting perspective we anticipate our investment in late Jurney to be accounted for as an unconsolidated investment.

Accordingly our income statements will reflect only our share of the earnings of the entity. Additionally due to purchase accounting impacts, we do not anticipate the investment resulting in contributions to earnings until the second quarter of 2017.

We believe this investment will generate a high return on equity for century shareholders while whitening our growth channels and further diversifying our business across additional buyer segments, product types, and geographic areas. Operator, can you please open the lines up to Q&A..

[Operator Instructions] Thank you. Our first question is from the line of Jay McCanless with Wedbush. Please proceed with your questions..

Good afternoon, guys. Great quarter, I got a lot going on. I guess my first question on Wade Jurney, it looks like most of their market focus is in North Carolina. Could you talk a little bit about what made this deal attractive and also how does this help what you already have established in Atlanta..

Well Jay, this is Dale. First of all Wade has a excellent business model and has demonstrated success in catering to the first time buyer. And so when we look at that it really was something that we felt made a lot of sense to add to our portfolio.

The company is based in Greensboro, North Carolina that it's largest market it's expanded out from there into Charlotte, Raleigh, Coastal Carolinas, into Florida and most recently into Atlanta itself.

So we look at that, it really isn’t competitive with any of our existing markets even in Atlanta because their average price point across our portfolio was about $140,000. So we look at that as a market that we aren't currently serving or were servicing before our relationship with Wade..

Got it.

And then I guess the other question is there the timeframe or a certain times that this JV is suppose to last or is this - are you guys are looking at this is a long-term relationship?.

Well, we have a path to full ownership in our agreement but we are very happy with the arrangement that we have and we are looking for a long term relationship with Wade..

Okay, great.

And then on Inspire Home Loans, could you maybe give us little idea of what we should be modeling for the SG&A spend as you guys ramp that up and is that going to be broken out as a separate line going forward, it’s going to roll into the regular SG&A line?.

Jay, it's Dave. As we said in prepared remarks now we don’t expect to generate any profits until the part of third quarter of 2017.

So fourth quarter of this year, first quarter of next year it can be a couple hundred thousand dollars that we are going to be moving through there as we are hiring people, hiring loan officers, getting applications done, investing time in dollars, into software costs. So we are on a front end of investing some of those dollars.

So one of the reasons why you know look at our third quarter SG&A we start incurring some of those costs, but you always start to see a roll through in the fourth quarter and first quarter. And then in terms of reporting as we get into 2017 and the operations are moving, financial services will be broken out as a separate segment..

Okay. And then the next question in terms of the additional SG&A spend that you did to drive order growth quarter this quarter.

Is that something we should expect going forward? I mean great results from the spin but how should we thinking about that SG&A margin over the next couple of quarters?.

I think as we are looking at the fourth quarter right now, the third quarter of this year is 12.5% versus 12.3% last year. And for the first nine months of the year we're up 10 basis points compared to last year.

And we're looking at the fourth quarter, we also look at some of the experience we had in the third quarter and third quarter now we had some higher transaction cost, but we also started investing dollars in some compliant activities.

As you can see the top end of our guidance ranges $1 billion, so we potentially loose our emerging growth company status and need to be Sox compliance. So we have been investing a fair amount of dollars in that. We spend a fair amount of startup cost in Utah.

We have been very pleased with those successes and Utah given in two quarters we already have our first closing, but again it does take a little time for that division to reach profitability. And then as we talk about the financial are also starting to increase some of those costs in the third quarter.

So when we look at the fourth quarter it's probably going to be a percentage roughly similar to where we were in the third quarter..

Okay. One more question, I'll step aside. I was interested to hear the commentary that you guys are seeing opportunities in Houston land and making some deals there.

Are you seeing opportunities to buy land maybe a little bit cheaper than last year or is the growth coming back to that market and you are willing to pay prices may be at or above where they were last year?.

Hi, Jay. It's a Rob.

How are you?.

Good. Thank you..

In Houston, it's two fold for us. One, we are going for the true entry level buyer profile in that market and looking at land deals that serve to hit that price point.

And then second we are seeing some price reductions certainly not increases but price reductions and availability of better located land for that entry level price point, and so that's what we are looking at doing. And if you look at the portfolio in Houston right now, we're about 88% controls, so we're very cautious on any new land deals there.

Not only there is a need to meet our entry level criteria and our velocity criteria, but we are looking at doing things on a roll adjust in time basis where we are not exposed to a lot of land on a long term basis. So that's strategy in Houston and we're finding opportunities that meet that strategy..

Okay. It's sounds good. Great quarter. Thanks..

Our next question is from the line of Nishu Sood with Deutsche Bank. Please proceed with your questions..

Hi guys, this is actually Tim Daley on for Nishu. I just think I’ll - really quickly piggyback on some questions that were just asked.

So on the financial services, just quickly so - I guess how quickly you guys believe you’ll be able to ramp operations in there and do you have any idea of kind of in your modeling out what you are forecasting for capture rate going forward? And then as well would you too have any retail exposure in this so catering towards non-Century customers? I guess that includes the new JV as well..

Hi, Tim its Dave.

For financial services I think it’s going to take us a couple of quarters to really ramp it up as we said we expect the first couple of quarter here to be really spent investing time and effort in getting the entity setup between all the legal aspects of the company and starting to hopefully start taking applications and closing our first log in the second quarter in which case then third quarter we would start to see some material accretion to earnings.

So it’s going to take call it at least three quarter to really get us to that point. In terms of what we’re looking at for capture rates we’ll provide some more color on that as we get into 2017 when we provide some additional guidance for the company as we look into 2017.

And then retail exposure for that company, yes, I mean obviously we’re going to be providing a great service to Century's home buyers but at the same time we would not be excluding other retail activity. As well as the new Wade Jurney transaction, we think that’s also another great opportunity for us to provide ancillary services..

Great, and just to follow up on that.

So would you kind of be the lender of choice for Wade as well? Is that kind of how this was - is this part of basically how you thought of the deal?.

No, not necessarily. No, I think that our entity would have to compete with other mortgages in the marketplace..

All right. Thank you. That’s very helpful. And then I guess just shifting over to gross margin so the commentary was that it was down year-over-year largely due to product and geographical mix.

So just looking at values and backlog it seems obviously there is going to be a lot of moving pieces for example Vegas is now about 14% of the backlog value versus 5% last year.

How should we think about this mix shift going forward and kind of directional movement on gross margins just kind of from a regional basis?.

I would tell you, without looking at on a holistic basis and what we have in backlog and seeing what we had in Q3 and where we see Q4 going.

In Q3 we did have some positive product mix come out of our attach products and then as we’re looking at that product mix going forward into Q4 I don't necessarily see that - I don’t necessarily think it will have that same benefit of the attach product to the higher margins coming through in the fourth quarter.

So as you are modeling out gross margin for Q4 it’s probably going to be more similar to how our Q2 shook out where we didn’t have the same product mix coming through..

All right. And then just one final question. Really strong absorption pace on the year-over-year basis but from our forecast little bit obviously weaker on the community count side. So just trying to think of absorptions going forward, the year-over-year comp gets I guess a bit easier you expect to continue the strong pace that you are seeing.

And then if you could just give us some inside into how late summer kind of trended into fall from the traffic and order perspective..

Well as you can see, we had pretty good order growth year-over-year in the third quarter. When we look at October that we've now just completed the positive trends continued in October that we saw in the third quarter..

And then was just from - has that spurred by some community count growth or was that a continuation of absorption pace, trying to get a gauge for the strength coming from….

In terms of year-over-year basis there really wasn’t much change in terms of community count. So it was really driven by increased absorptions..

All right, great. Thank you..

Our next question is from the line of Will Randall with Citigroup. Please proceed with your question..

Hi good afternoon, and nice quarter.

In terms of your comments on Colorado, I apologize if this has been asked before but you said you were able to offset some of the inflation, could you give us a scale of magnitude of inflation in terms of labor inflation for Colorado and for the total company and give a little more on that specific on how you offset that and what that means certain to gross margin going forward?.

Yes, in terms of pricing pressure, the subcontractor base remains somewhat constrained in all of our markets. I don’t think we experience anything different than anybody else. We hope that maybe we do a better job managing than some other people.

But it’s an everyday process of making sure that we do have the right subs and enough trades people on the job.

In terms of the way we’re dealing with that is trying to make sure that our jobs are always ready for the subcontractors when we ask them to be there that we are scheduling the jobs as efficiently as possible in an attempt to make them want us to be their preferred builder.

And in terms of value engineering, we’re always looking at ways of taking unnecessary costs out of our product and there's no one answer that that we do, it’s just a combination of things on an everyday basis, as well as continuing to look at what our costs are and striving to keep as well as we possibly can..

Got it. And then just as a follow-up, in terms of pricing power, I mean what we’re seeing with your results potential is a bit different than we’re seeing with some of the peers, and that at least the bottom line results make it appears if you still have pricing for most of your markets.

What do you think the differentiating factor there is outside of Colorado?.

We really look at there on a subdivision by subdivision basis. And we have pricing power in some of our subdivisions and other ones we don’t have as much. And so we really bring it down to that level as opposed to saying across the Board, we get in this market.

It’s really down to each individual subdivision and we try to get as much out of each one as we possibly can..

Got it. Thanks for the time..

Our next question comes from the line of Michael Rehaut with JPMorgan. Please proceed with your questions..

Thanks, afternoon everyone. Two questions here, just firstly on the acquisition or the 50% interest. Just kind of curious about how to think about that obviously you said on a consolidated and we'll start contributing in the second quarter, following purchase accounting adjustments.

Given the purchase price relative to the number of lots and revenue, it would seem and maybe obviously I love your thoughts on this, if I’m thinking about this correctly, but it would seem like the profitability levels here are relatively low.

And just given the acquisition price and the fact that even with purchase accounting, you’re not expecting a major contribution, even the - on consolidated line.

So just wanted to get a sense 2Q 2017 forward, what type of net margin or operating, pre-tax type margin should we think about it – should we think about the business and perhaps off of the similar revenue line or a larger one?.

Well, I think the first thing Mike that you have to understand is the business model of the Company, and that is it’s extremely asset light.

So when you look at nearly 4,000 owned and controlled lots, the number of owned lots that they have is - I don’t have the exact number here, but probably around 500 to 600 own lots, and the balance of them are all controlled. And that was one of the appealing factors about this particular transaction.

So I’m not sure I would let the purchase price dictate what the profitability is just given the business model that this Company operates under..

And any guidance at all on the type of pre-tax margins that we should think about from this business?.

Mike, it’s Dave. Not at this time, as we get into 2017, we’ll have better clarity on. Right now, they’re going through their 2017 business model and business planning with us and we’ll provide some more clarity for you guys on that, in the New Year..

Okay. Also in terms of the mortgage business that you’re starting up, it was interesting to hear that you expect only 200,000 to 300,000 of expense per quarter until you hit profitability. I was wondering if it is heard that right, number one. And I guess number two, I actually kind of thought that number was lower than I was expecting.

And I don't know - I’m just curious if that’s because you’re kind of rolling out one market at a time and so you’re limiting upfront costs and you’re kind of managing it and perhaps it’s kind of a let’s say a two year rollout period, where you finally get it out of your regions or can you give us from an expense management standpoint given your broad scale and having a lot of markets that you’re already in, I would have thought it would have been a higher number..

We can definitely make it a higher number. It will depend on how quickly we get applications, to accept that we bring - separating on people. If all goes extremely well in according to plan, then yes, the numbers go higher. You look at the legal costs and higher in trading and all the cost go along with setting up a company.

We could end up front loading a lot of those costs in the first couple quarters and that $200,000 to $300,000 estimate becomes larger but at the same time my third quarter profitability would get better..

Okay.

Just a couple more here, community count, obviously kind of reiterated what you expect for - through the end of this year, but given the increase in lots, any initial thoughts on how we should think about community count for 2017?.

It will be higher but at this point we’re not giving out that specific information, but it will be higher than where we in the year..

Okay. One last one if I could and appreciate it. The improvement in sales pace, year-over-year was obviously pretty impressive, very strong 25% we have against the average community count.

And apologize if you kind of went through the drivers here, but I just want to get a sense of really what's behind that either from a product mix standpoint, obviously you had a lot of improvement in Texas, but that’s still a small market.

So just any sense of what the drivers are there and if that’s sustainable kind of going into 4Q?.

Yes, as we look at it, it really - it wasn't driven by heavy discounting.

It’s really a function of even though the community count year-over-year didn’t really change, we do have a number of new communities, but we’ve closed out some older communities and some of the newer communities are just at a price point of location that they are going to generate higher absorptions.

So there’s really nothing specific that we did to generate that. It was really just a variety of factors that came together..

Right, thank you..

Our next question is from the line of Alex Rygiel with FBR. Please proceed with your questions..

Thank you. Good evening, gentlemen.

Couple of quick questions, first, any comments or thought or directional guidance on gross margin within backlog, as well can you comment on the cancellation rate in the current quarter?.

Yes, this is Dave. For gross margins kind of what we’re saying is that when we look at the fourth quarter, we think it’s going to be somewhat similar to where we were in the second quarter on adjusted gross margin base through low 90s and that’s due to looking at kind of the product mix that we think we have rolling through there..

That’s helpful, on the cancellation rate in recent quarter?.

One second, from last year - current quarter roughly 22%..

And was there any interesting dynamic as related to sort of traffic flow or traffic activity through your communities during the quarter, does it start slow or end strong, did it start strong and end slow?.

Actually when we look back at the quarter, although, that seems like a long time ago now at this point. It actually started a little slow in terms of traffic and it kind of built over the quarter. And we look at sales probably the same dynamic occurred..

One last quick question.

As you think about sort of 2015 and to 2016 the winter weather, how did that your affect your different geographies if it all and how should we think about that going forward?.

It's weather obviously because we're site building everything, we are at the risk of nature all the time. So far this year the weather in all of our markets has really been significantly better than it was in the previous year. We are hopeful that continues but that's something certainly outside of our control..

Of course. Thank you very much..

[Operator Instructions] The next question is from the line of Alex Barron with Housing Research Center. Please state your question..

Hi, good afternoon, gentlemen. I wanted to ask you about Wade Jurney, so you said couple of things, one that your business model is different and I was hoping you could extend on that comments a bit more.

And also you said that you expect to start showing profits in second quarter, does that mean there might be some small losses or something in the next couple of quarters?.

No as far as losses, we would not anticipate that at all. The only reason that we're not expecting profitability in the near term is the venture will be profitable, but by the time we apply our purchase accounting, we won't see any significant impact.

In terms of some of the nuances where that business is different than the general Century business, first of all it's the ASP as we said, their average sales price is about $140,000, so significantly different than the Century ASP.

Everything that they - virtually everything that they build is started as a spec as it rolls through the production cycle. There are no auctions in their business model, so they are building the house for the whole buyer with LTF the ability to auction, provide auction in the house.

Its asset light and that do they take land on their balance sheet until they ready to start actual construction on that. And one of the other aspects that's it's relatively unique is the fact that they don't have model homes which helps keep their cost down and they sale out of retail studios that are typically in a retail center.

And so it's very different than the Century business, but we are very excited to have part of the overall Century family now..

Okay. And if I could ask little bit more on that.

So are the margins similar to Century or they lower but the turns are higher, can you elaborate little bit on that?.

The margins are bit lower than Century but the turns are significantly faster?.

And then if I could ask another one on your existing business. So the orders in Colorado I guess they dipped in the back half of last year and they seem to have dipped again this year.

Was that by design or is that just a natural flow of the business? And then I guess related to that, it seems like your backlog conversion was much higher this year and across almost every market.

So I'm just trying to see what could drive the low end or the high end of your guidance for fourth quarter in terms of deliveries?.

So in terms of sales in Colorado nothing particular have changed, the market remains strong. We don’t have a lot of inventory in this market either that other builders, reseller or even us and so from to a certain extent that does hold down our sales and that we are not going to sale too far in advance in a particular community..

Yes, and then from a backlog conversion rate, I think you look over the last eight quarters and we have only one quarter where we dip a low 70%.

So as you are looking at your low end, high end of the guidance I think they are depending on what that backlog conversion rate is and where we shake out that's how you get to the lower the high as we are working on building product.

We think that hitting that midpoint than it was which is slightly better, but we think that guidance range is a good place for us to be..

Okay. That's helpful..

Thank you. I'll now turn the floor back to Dale Francescon for 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..

This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time..