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KBH KB Home

Participants
Jill Peters SVP, IR
Jeff Mezger Chairman, President and CEO
Matt Mandino EVP and Co-COO
Rob McGibney EVP and Co-COO
Jeff Kaminski EVP and CFO
Bill Hollinger SVP and Chief Accounting Officer
Thad Johnson SVP and Treasurer
Truman Patterson Wolfe Research
Alan Ratner Zelman & Associates
Stephen Kim Evercore
Matthew Bouley Barclay
Susan Maklari Goldman Sachs
Michael Rehaut JPMorgan
Michael Dahl RBC
Call transcript
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Operator

Good afternoon. My name is Alex. And I will be your conference operator today. I would like to welcome everyone to the KB Home 2021 Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode.

remarks open opening questions. lines company's the we the will for Following XX. conference and company's at February recorded is website be through Today's being replay will call available for kbhome.com the

call Now over President I Relations. may you Jill, to would turn Investor to Peters, Senior like Jill Vice begin. the

Jill Peters

for for you, quarter the you and of Alex, to today fiscal everyone afternoon, us Thank fourth review good XXXX. thank joining our results

McGibney Financial Matt Executive Jeff are Chairman, and Mandino, Mezger, and Operating and President Senior Officer; Jeff President President Rob Hollinger, Thad Presidents On Executive the call Vice Officer; Vice and Officers. Vice Chief President Chief Co-Chief Officer; and Vice Executive Accounting Treasurer. Senior Johnson, and Kaminski, and Bill Chief

considered today's Litigation meaning the those Due not them. Exchange guarantees company results update forward-looking to different statements During the could forward-looking Securities or undertake Act items Reform in statements. be of filings the obligation from this Commission, statements the call, within Private in to and and actual implied future of are materially factors will are Securities including does XXXX. in any that be our stated with those These detailed of and not results the press various release discussed

reconciliation at our their Jeff is press a release of on with the most addition, and/or can page of during found And to referenced website today's in In Investor that, directly non-GAAP Mezger. measures today's discussion measures be comparable GAAP kbhome.com. the here Relations

Jeff Mezger

XX% our profitability by share our XX%. over our up revenue points growth achieved XX%. a objectives than Happy and Year. return equity of had producing year driving afternoon We of remarkable in and everyone you, on excess in more XXXX and basis expanding earnings an XXX increase good to scale our New Jill Thank per in We

our were were considering teams even throughout the are results notable delays as that supply year more successfully issues. navigating pervasive and these challenges the municipal accomplished they have despite been Our chain

As continue XXXX, to we're growth. we begin poised delivering returns-focused

billion of $X.X With grew respect This We than year-over-year XX% higher. resulting our margin earnings $X.X revenues with XX% will drive more expansion in profit $X meaningfully billion we per backlog of a expansion base in which total to XX% a in of representing a to increase the a roughly to of operating of top-line bottom substantial in expectation dramatic strong the $X.XX fourth $XX,XXX. return quarter, achieved and a combined approaching provides unit gross Our on which represents our value margin our on billion revenues diluted nearly share in XXXX. XX% year-over-year expected line. our support increase operating income an generated of XX% over per equity

a controlled acquisition which expanded XXXX. flow top is our this Disciplined addition generating put to profit position to that business and or In balanced XX% significant investment growth our remain year-end lots level count to XX,XXX development. community cash from priority consistent is we over nearly billion our lot and is toward in we $X.X in capital. growth work land in in We owned XXXX allocating almost higher our of healthy approach and

all XXXX delivery is within anticipated regions our across we position our and lots own both lot Our diversified that for and we the need goals. of

XXXX. lots the we that growth for now also We own in need sustained or control

third over quarterly completed with stockholders quarter our in to returned addition reinvesting repurchases we nearly CapEx. along and our price our implemented all balance lot and in the and to price of our increases to the share we $XX in In communities by pace, $XXX order that Throughout reduced production business, along cash releases the in million. optimize dividend, through our we million during over we managing year with debt across XXXX, to

Although backlog in outpaced cost a dynamic driving higher. the strength of rate continued the This our cost our our as net inflation to we quarter rose margins rise contributing moved year in XX% This pricing through our value XX%, is a decline value in of decreasing backlog to year-over-year value to net net similar despite in our community increase level higher. XX% the a contributed orders order than more order that count. fourth

of cycle we in beginning expansion our in gross the second margin the our will XXXX of With our be XXXX times power experienced reflected most quarter. in pricing

reactivated tailwinds to margins the communities continue opened of will of mix average. impacts overhead. where quality performance The amortized the in results impacted unfiled per from more has the our company community and benefit to structural recently as diminish, the running excess our higher of deliveries including addition, continues In higher ongoing into rotation are communities assets interest from in a reduction monthly

many quarter. new All fourth XXXX. We this year. largest factors opened lot expectation our count enable years in these XX openings our driving of accelerate that are will for of successfully gross new in a margin The in nearly I combined to of community communities the in including our XX% XXXX, mentioned higher number us XXX

result, over XX% about to and communities, that a of XXX we now year-over-year shared up ahead September. As projection expect end with in we our XXXX initial

contribute revenue also addition expansion XXXX. count XX% our our for In will in a XXXX, planned supporting in of to roughly growth increase community

the sequentially. fourth absorption pattern per seasonal during orders a quarter net typical reflected monthly of Our community X.X

For we’ve reason per we and the absorption the decade. personalization among value our the industry. the which pace more year, rate best buyers a in generated in the community than inherent The have believe in X.X our rates model highest annual seen that long choice is Home averaged primary per absorption orders build-to-order month. we net

year With the their interest market to and price with experienced, is home the affordability. addressing a appreciation rates appropriate strong rise that expectation will this has moment it spend

resale in raising price median positioning demand premium target opportunistic be household on strive larger and below submarket, reasonable attainable home to meeting based homes We strategy the is new the opened. that of and income our once to be be of location -- price median price by Our median community a the buyers. we segment to at at then our to open the reasonable the when

selling price average highlighting reported products. nationally year-over-year in below increase affordability about levels location rose X% for XXXX the of Our and deliveries the overall our well pricing on

track seeing of could calls, discussed As indicators in challenges internal previous we’ve time. which that this a to affordability key we behavior not signal number on gauge we changes are consumer at

the footage of One of selecting. homes that are most the buyers current is square these of

rotate typically to home order will home smaller need to if achieve a they As to they in down ownership.

footage XX% feet Although we plans about in of to homes. buyers communities offer below square continue X,XXX our choose floor larger

X,XXX historical trend. our year with have in above our our backlog homes between slightly X,XXX feet Over range. consistent average deliveries that past And the are

risen. view also studio and expect as spending We buyers. but revenues look We in premiums enhancement increased would prices base which a buyers discretionary lot revenues the buyer see have a about even our fourth have quarter, we for our basis and stressed premiums as spends to home our lot revenues. a our solid two per On decline to XX,XXX at studio combined these are categories if in

of importantly in an buyers. high. average credit XXX Finally quarter FICO the profile the Their is all-time was and score perhaps most our

for a payment qualified In a addition averaging our over down buyers of buyers overall two-thirds $XX,XXX. of are and conventional about our mortgage

recent start incremental we these help should conventional increases started an homes quarter X,XXX and growth in the that position to the metrics strong limits our production the credit. strong production to FHA financing Taken had At our year-end, X% during the X,XXX loan we industry. together, XXXX as our purchase with I'll over buyers homes. remained personalized home illustrate the low benefit provided Generally, both sold. in already with in customers' mortgage once also the extremely it over We for their note work to in we and XX% fourth rate homes our desire quarter is Reflecting these homes deliveries. of so. a cancellation

two about time out October. leveling see encouraged the months. in while quarter the stabilization. November and signs were in September December four the we're As to consistent some to build with over times Pointing weeks sequentially a they last Construction of and extended

and part on year hold and increase expected this Our projections improvement the we these of could build timing the in levels our depending in closing that this latter times year. for at assume

doesn't be closed mean than homes of contribute we One the model count communities revenue have of to that That aspect dynamic our XX,XXX is between our tends do left will XXXX. not communities expected backlog community business built-to-order is with get profits. and to we sold that to our representing consider our they growth is In for community $X out, that that of sell. our to the continue to revenues count. five of those revenues value and bulk comprised billion the a out Our homes include meaning and over overlooked less

we XXXX of call quarter homes X,XXX from X almost fact our are well that backlog first into on deliver this in typically sold-out In update Since approximately time billion the will includes our net an orders. XXX provide communities revenues. we at

While December prior comparison this footprint net seen slowdown foresee net throughout of year-over-year and for has and factors difficult strong negative into a spring were in a a comparison. couple demand XX%. the creating combination across we season a geographic the resulted In orders have at XXXX selling we in strong, order our year, of a particularly quarter the weeks not of months, past first in ahead, six

and our homes price our loan Specific comparison and our homes openings we to to conditions similar we quarter. as the and have the progresses to extremely to Home, choose buyers Market expect we decline an end a compelling and point with approach demand. year-over-year rates quarter orders the communities, community mortgage demographics, for average healthy As weekly the for to of of anticipated limited scheduled personalize count additional in along net continue the location first our ability believe drive very build-to-order buyers. down from easier first-time for favorable KB of percentage mid-single-digit we about interest remain in products quarter are supply with particularly the community benefit

Newsweek's Our responsible KB companies for America's the Home named ESG recognized the year of a leadership builder has national to list row. only is been in second most as

thank for up, to an and recognize wrap closing, amidst incredible homebuilding volume determined of XXXX KB year year. challenging the came employees and Before have relentless I like in I significantly career. our our was my that We a Home. the about from I seen These for results In of our all fluid and increased would conditions in operating most rewarding entire team. XXXX efforts

share continue growth, homebuilders introduction also to of our produced among addition customer we drive energy production and large per maintained generating leadership providing meaningful on book value in results, our substantial equity. in to levels efficient revenue increases the In satisfaction features. home and and we through financial significant and these our return earnings innovation the highest Alongside healthier

the to a named result As most was of the Wall these in list other factors conjunction of KB was developed the a Institute many in ranking companies Drucker Journal. the Street US, managed the and that XXX Home with effectively by

our equity the anniversary, during XXXX We XX%. Jeff another remarkable review. return we to the of unfolds. we look look growth call XXth which year as that we Jeff? As will for progress now turn sharing than I'll year expect ahead financials we to of with forward will drive you the ultimately celebrate which more anticipate on our With to over

Jeff Kaminski

our year-over-year were Thank good drove XX% our performance XXXX, our full solid results inflation their up that owned a or outlook year in highlights We’ve with revenues, XXXX results cycle well and $X times exceptional fourth afternoon, strong that XX% year average were increase the share, provide a returns cost value a year. of I in the full quarter will billion a market and of impressive $X.XX first ranging issues of billion number execution full revenues reflecting expansion With community nearly in expansion share while earnings controlled, faced the financial construction In significant and as ago in growth Housing XXXX and increase count, quarter, robust now XX% in XXX% in as meaningful challenges for to of in year-over-year we finished portfolio housing communities quarter the a in point and price. of everyone. revenues per I our XXXX XX% of Jeff, housing along basis increase all operating are per few fourth you, well four diluted in our chain and generated the cover supply central XXX backlog for our in delivered during as from including XXXX. year with and continued in quarter XX% Southeast. a that revenues and well extended the margin strong a homes lots regions in from we XXXX our for positioned growth summarize and fourth minutes. will operation the overall significantly X% up earnings in selling region our increase as a

we the continued to ahead supply first to demand buyer will home continue we anticipate XXXX Looking housing conditions strong while quarter, be navigate challenges. with chain market expected favorable

first revenues of the expect billion For XXXX to $X.XX we housing quarter, billion. in $X.XX range the generate to

this we the delivered increased community price reflecting we're selling full for for an selling our housing XXXX the billion supply fiscal quarters housing year midpoint and for to the $XXX,XXX to revenues net average dynamics highest price market the higher overall over top-line change achieve with approximately ended quarter, assuming order $X.X XXXX. forecasting count in higher for our homes $X.X strong fourth or first year no performance average our XXXX to range along with up XXXX of $XXX,XXX billion our believe to at selling For we're XX% projecting In well-positioned recent level approximately our expectations in year-end XXXX. chain in compared as Having quarter. billion the since of XXXX we're a $X.X backlog continued price conditions of average

inventory-related the current year, building of the $XXX,XXX in totaled approximately compared XXXX year-earlier fourth of the up included overall a believe average $XX.X to quarter million XX% be for selling we Home $XXX.X The quarter. as $XXX,XXX ago. million price charges For $XXX,XXX. range operating to million the year our versus for $XXX.X income quarter will full

up XXXX fourth XX.X% basis was margin quarter. operating from XXX Our points the

the in inventory-related and margin XXXX to homebuilding XX% quarter approximately expense XX.X% our compared be improvements excluding Excluding for income charges the operating charges as XX.X% XX.X% ago margin inventory-related our any operating We gross was of anticipate compared quarter. SG&A margin both reflecting a ratio. to first year impact will our year-earlier

expect the midpoint XX.X% significant reflecting the we year, expense SG&A a full both this positive metric which in to XXXX to basis XXX be gross and represents of at improvement the For XX.X% ratio. range continued our of year-over-year in momentum margin points

profit the to quarter XX.X%. improved quarter points XXX XXXX margin Our fourth housing basis year-earlier from gross

quarter amortization by offset Excluding for selling interest and reflected inventory-related The increase our charges, gross the other previously XX.X%. reflected labors. XXX the a reduction capitalized XX.X% We're interest. selling in housing the of for and anticipate in expected to margins margin higher improvement prices and of margin a forecasting quarter year-over-year materials We year. and impact year-over-year margin to points for recently primarily range lumber by significant lower that of basis in point costs of communities, a representing gross of partly have construction driven profit strong cost expansion increases communities our the mainly XXXX the the price previously an low gross outpaced pressures during opened higher in sequential first amortization capitalized XX.X% in quarterly established for

full be XXX points an XXXX. the as For of basis to will range XX.X% year, the increase the metric of compared in midpoint we XX.X% to at expect this

favorable community improvement projected to an increase partially XX.X%, be other impacts expansion are ratio and anticipated by expense basis meaningful of XXXX as an Our leverage our year the points from for the selling, higher scale. due offset our cost revenues SG&A approximately in compensation versus personnel general leverage first and increased ratio We're and to reflecting of XX count. fourth support year enhanced in points XX partly quarter housing prior administrative operating year-over-year in support the a to forecasting by quarter ago, expanding investments expected expenses resources performance-based increased mainly X.X% offset improved revenues basis from to

of We ratio our SG&A XXXX will X.X%. to the full-year expense be range in expect X.X% that

financial tax rate quarter, was improvement tax fourth expect homes share current $XX.X for building would XXX energy XXL Our XXXX for be of year sustainability approximately period. year, reported credit revenues this points. ratio XX.X% quarter for any income credits or excluding Federal per We $X tax XX%. energy to earnings effective pleased million at has or both expense reflecting billion, extending $X.XX expanded XXXX of its notable expanded yet strong $XXX.X benefit with the first If a favorable net Reflecting housing impacted we're of share, represented the our Federal $XXX.X basis which by efficient full to from be of rate been expense favorably initiatives. level, credits our tax basis our XXXX tax energy XX% section of tax million share gross availability impacts not impacted and an points XX% by the We $X.X on tax tax XXX $X.XX million the industry-leading rate for very our fourth margin diluted Overall, of quarter by both our effective million SG&A and approximately results. diluted for approximately currently of per enacted. with of measurable effective legislation our prior-year we the diluted an reported another XX%, in improvements XXXX in the credits. full from is and $X.XX nearly operating income our increased margin by to per increase favorably

$XXX annual and senior our $XX $XXX notes million in repurchases, We of points. of interest savings share XXX our basis resulting million also leverage improved completed refinanced year-end of of ratio million incurred by

the our from year sequentially. We the X% now of quarter sequentially. communities, Turning X% fourth quarter the XXXX down ago and XXX X% year community X% was up corresponding down count, average to ended up XXX and and from XXX with

a a quarter low average represents will our a expect relatively quarter basis, single-digit price sequentially percentage. count count for ending first by XXXX down community community low our remain first anticipate be On XXXX. we and year-over-year flat We XXXX to

We increase the of ending and count starting the quarter beyond. in to in a with quarter-end in to community XX% top-line this to quarter community supporting as we're our XXXX second expect additional year through We the sequentially count sellouts. the our expected opening growth remainder outpace year increase XX% anticipated

invested openings, invested XXXX, fourth the During total XX% land acquisitions. $X.X community million to our or facility. million we $XXX year. representing land of of billion the $XXX was total land unsecured the we quarter acquisition future land In liquidity including previous revolving drive compared in with $XXX billion capacity and over credit approximately our year-end in million $X.X in development billion under to At $X.X development available

capital previous XX.X% year-end at to improved to to debt compared ratio XXXX Our XX.X% the year.

generate current flow the investments and expect to and XXXX We future housing in revenues. community in significant cash our land supporting to year count fund years targeted growth

$X.XX by Our as was $XX.XX. our XX% increased a value billion to XXXX $X.XX billion per stockholders equity ago share compared and year-end year book to

XXX one notable basis our points. equity the year-over-year return in a to most achievement year, significant Finally, XXXX of of the was over for expansion improvement full on XX.X%

and we margin plans SG&A with expansion summary, expect our on our strategy by the ratio. expansion to while meaningfully significant strategy, housing the value Given of to focused principles our continue midpoints This We emphasis in in key in our an business count in year-over-year of leadership an of backlog market XXXX driven drive meaningfully XX.X% from expense over the XXX enhance that of financial plan reflects confident expected further will we're execute be growth returns increase generate improvements significant community able XX.X% of continued metrics. to guidance and to housing on revenues current model, using that and our ranges, year-over-year in In team insurance and community our focused XXXX. both of XX% returns we in points housing access increasing strength returns favorable These further to producing improving stockholder market XXXX. on margin. a top-line will was outlook our gross long-term operating opening operating our a continued the season return and we and in in conditions, our view our equity basis XX% margin our while growth attractive improvements

will open please the questions. We now your lines. take Alex

Operator

first will Patterson time this question-and-answer Wolfe Truman question. question At a Research. from Instructions] with Thank Please you. of session conducting be Our your line comes the we proceed [Operator with

Truman Patterson

Hey, afternoon, questions. for good everyone thanks taking my

think in about your So, gross guidance first XX of XXXX highest I margin plus XX% the years. on

the pricing trying this the and initiatives improvement Just understand versus driven your to outstripping trying down SKUs, national such unfair as simplifying of working an internal And but how costs. the be to some offerings understand might legacy is land, of suppliers? much with question, streamlining being by partnering

Matt Mandino

communities the I that performance and we that importantly in point decreased nice driver and seen I very the those backlog of and lot have driver as in yeah interest Truman, detail of the is is would as is amortization of the build through you performance a we communities number through deliveries increases is with existing the also off have through XXXX new think we’ve went a our the pricing there important point we actually communities there as very, certainly opened we XXXX is the Right those But levers number - see in communities. a coming coming one to XXX just the of impacting year outstrip gone - cost encouraging we have XXXX. margins as been very I the is out think say communities out

from the have large a of to rotation margin. that communities So think XXXX impact XXXX we I on

where time under wrote and under improvement. in than pace point margins most the the at the cases and open wrote in we’re much we we those nice those drivers higher pace seeing for higher are So communities main fact when in XXXX

Jeff Kaminski

have we this Jeff. are company much work but eyes bit a could lot complete even results, transformation expand on on football I we a and and spiking not better the here we of to because is of now. our the set have it do, If a Truman, pretty little

said strengthen platform. analysts back quality well did retool the sheet of focused out create laid and that initiative we were very would was community continuing shared growth with on returns went. pandemic and with of it enhance and a we We went when with growth that. and and off delivered the do what really on about us We and were the we part a we refine plan, the And in and balance You XXXX on was and we path, XXXX coming to that it we out growth up hit. sure to

get lot you and can that with things I the through and it with - we is enhances come say managed one a now good the that And premium two-step some I across to best studio revenue. company. running better. get deal across we would up across idea the on lot improve the more boom Then system in a we how we the know across it’s shared idea it my with about growth share and studio comments share that the Boom system And complete to premiums quality through their are on ideas you is You touched performing and everybody business footprint. and in transformation profitability. there all continuing like our studios we

performed old and it months couple new the is where the I that market the a all Your product, as it was We're of financial and helps performance. absorption the location, up into per is the the community is out ago of of above. years above the your communities from three/four it our strength at Jeff think it's well is it average, shared they’re

changing structurally reflected company's year. wouldn't And it’s we’ve ourselves I to in level riding our new on just and a I the wave We it how pricing operating. from in. this we're guide taken So environment think this for pin the that

Truman Patterson

and to and the started next part, last products get flaring availability closings up then in you Yeah, see but XXXX? by any quarter of call just any be that to two-part availability you an first hopefully no have certain improvement is how question that impacted could idea of Omicron end baked I might COVID My this for the quantify the up hoping thank guide if here aside, and just incremental well. wave, clearly in the question. labor that first been that's you hoping XXXX flare Omicron and impact in just remember all has

Jeff Mezger

and companies Rob back were I in And not little how first better very and seeing where and sensitive is whether Matt can it. think our within we when are played to We've kick are for in and next manufacturing hit seen own people are to go having up on one, back have think or you're for obviously move and the on in unknown thoughts the to five on thing depending the responding like away we're but these the symptoms little Omicron they you a ups base. it's and as not, you out media business supply Rob we’ve locked come in we're go And about days you flare want days what's they to subcontractor and or seeing have state it out chain then good it to me work away don't some we in. in XXXX on keeps society the and any than back relative moving and to ten they so term whether about it's reading impact an down give playbook that manage flare or right getting you the what smarter what through we're yet to I that's I along a as it then field?

Rob McGibney

the Omicron of several are this. far of two into just similar we and for supply Yeah, gaps. mean touch things seeing. years years because improvements into more developing chain we're a workarounds almost lot some some in months, on it XX of areas seeing that just two we're I the I'll that in outside we're experienced

used offer supply year one range available focus the those we one earlier partners flip one side. so allows chain. in our some supply that producing traded really but time but are to issue garage and gets loose areas pieces one for are And with time in what to developed readily the our but another call have styles back area action communication with doors the and suppliers of through in to the issues issue missing just and while one methods or at up. what wasn't and worked biggest partners that we doors in When in worse parts despite to step are, and and our disruptions times to up lock from at future seeing needs, in trade but process extended manufactures. our some lead is cycle of the what’s on Like more kind for of our and solve we in delays level. continuing improves same That’s alternate has and around garage capacities the stabilize the QX item the seeing the another. homes we’ll and products an We our led scarce, that improved, there smaller are then another still on issue our one our get minimize progress their become match we've example an we're finding on taken suppliers to we to suppliers adjusted challenges. around others that pop minimize sync for time a And some we’ve We’ve door tends elevated the now phone but real to we of to radar,

Operator

Thank you.

of line Associates. the from comes Please your question. question Zelman & with to Alan go next Our with Ratner

Alan Ratner

in job guys, nice New the year. Hey Year and in Happy quarter the Congratulations.

you but probably your through gross curious those has pricing spiked build-to-order up. XXXX more saw model. based tail have the just a at much maybe very of inflation sits levels costs roll year it early to with question ton and visibility on of across towards end, lumber obviously lot obviously look a those back we’re guys teak environment as we ago. you and into XXXX dynamics. and strong when today, this X/X seeing the of the a I’m that First cost backlog margin that’s months Presumably Close board won’t guidance

So pressures have the in what pricing accelerating - environment to do current the power like seems that's we're today. offset facing you sufficient cost

it if in a the side earlier is how talk bit as faring are little about it on pricing you Just was XXXX? strong

Jeff Mezger

in shared point is the think as upwards. time It’s So comments in to more bounce city, we’re see and of I ahead able to pricing But Yeah, Alan going around we’ve moving the lumber but seeing price a increased. back at you’ll costs this level every me some. have move I in than interesting are different up costs been up cost at it

Alan Ratner

that’s Right, good hear. to

a to very and outlook any for in growth. like have can I’m And month Second I do similar sense growth be bullish have market half absorption the your XX the on what your competitive the more community landscape. think months? put you and think looks on the a sustained six, outlooks. XX% Maybe of guys on extent. the not lot plus with over in growth outlook if curious you count hitting per community peers question just there you same Again that communities pace XXXX MSAs a next six the

Jeff Mezger

know can more our little and community rate a the per taken now and to and pace. market many do, demand it and do a weaken assets, the how you have constrained volume and larger, if don’t our may supply approved of margins price than goals couldn’t develop this absorption see with a so community you’d the continue month, not little stayed our bit, little to brought is markets per we’re I to sales subs a are that to see benefits move on may brought to down communities supplies open there internal look growth slow a we were better getting will growth aren’t it count because we in kind the I community healthy because we’re right year to do in our margins at back Alan take you that, going is not and and tell XXXX many year committed dynamic couldn’t are know more today bit least but if the up what Our like to where a limit share can we’re obviously think have at it’s so stayed now, turn what seeing and if positioned you communities today a but that drop with share market, how right we’re it’s it XX% is be to you is it where We the When that city, could I they successfully the to generating and about and the that rates the right how what there pace that’s markets a pace. we be city get like of I world heading we is you to now it’s is today market. run be were it’s

Operator

you. Thank

from Our question. Kim next of question line with Please to with your go Stephen Evercore. the comes

Stephen Kim

way, makes to of of robust of question what Yeah, us sort lot the margin it stayed. extremely curious a the rate ability regarding certainly view thanks that is right all bigger hear I like a and guide, appreciate is to now of I’ll demand was are rising higher, guys, need with time is a rise based own a and strong what demand -- and that's somebody questions remain kind what weaken that question, we wanted much my in to the the of to when it but sense, kind going picture obviously wrestling getting all to ask yours is and than environment that a is nice housing is be more you of I lot gross XXXX people in demand presumption saw is potential rates in is it XXXX. personal

house actually most actually with need right, it everybody like a or to you a a where you’re seems won’t extension unless about prices very buy if people to of think much is it you horrible at like and rates home the thinks by and house survey which you in are so shock as you How probably a you rise are If sticker XXXX? time I mistrustful think not do that one buy strike buyer did looking means see are probably that?

Jeff Mezger

that getting it and it so a group large is they're I with buying they the people relocating journey is home think behind go years they’re strong. they’re you a if have put are million a would creating from there that decade that demand married, are home strong out buying you’ve stays the will you million another decision little cohort starting all hitting rates better working needs of are seeing how bit how we they’re home then and of things that context about their millions hear heard Stephen demand jobs, and everyone in you demand if and you the people very differed strong see XX right these generation ownership have demographic the for getting about now met, you and just agree not that now the home you XX how right big I see up now so their are the

side our want available resale up same if in a went higher where it’s rates you, navigate the the you if flexibility impact a much analyzed inventory first-time world interest with when on bit sale a average is they are down are backlog stayed down of that shared City no million. and same to up and went there rate have all the time five real have the the $XX,XXX four the and our a I in X,XXX to little there percentage the to not point We and and we go [indiscernible] homes for They all rates payment. think at house profile predominantly putting one of a here the buyers everything builders in

to on we So, I is bring each XXX, communities submarkets XXX a of phenomenon. one as would and our say interest that people have market are to waiting, national list waiting there cities XXX, unique the is a it we not no just list these product

Stephen Kim

that be gains, period only another seeing any to way matters market curious and some or production as an that's accelerate in seem be to be for of going whether builders the to growth I to yourselves? this I are unprecedented you were of hear. am able and Yeah, you really are whether share actually smaller the related product good we’d their to such indication would guess to or builders scale yet is my for as you question starts are other to market year

Jeff Mezger

and challenges well for to navigating from can list the there it where but supply share business with builders is plumbing struggling as it see if going a are larger have done. a Yeah, five success a use ten And would our proxy if a chain of definitely opposed larger we great to they're have what at going and the division the down helps getting the with relationship the commitment every trade on relationships and better for created just a they list a we’re compared certainly I going is will take homes the you're top the think the that Vegas think partners where home having to and large our get other rather nationally, week Charlotte we're you as are if contractor where or the you Vegas I one you that in navigating in what's the Charlotte out to a builders framing we're in compared volume we to continue contractor it week XX yeah. within get privates, small

Operator

Thank you.

your proceed next of with Our question the Matthew Bouley Barclay. line comes question. from with Please

Matthew Bouley

the you on thank questions congrats everyone afternoon, and for the Good taking results.

type just you this you shareholder perhaps a there do balance sort So a capacity think significant the in be of this perspective clearly purely reinvested always on deployed as have a large up the in how of a could of thoughts is that of sort more large share something be will any net basis, up friendly step the the portion outlook, year? just into we income and guiding back from Thank but cash XXXX on XXXX sort to flow business harvest you more dollar of step programmatic you here know cash the cash about excess generating repurchase sheet generation you.

Matt Mandino

last let in our that question Jeff a have just or we and balanced it's Matt, years. six on good I'll shared like over add comments five a that we it's the so approach

down did growing while a we where just $X.X and debt the we upped like shares turn balance EPS and bought in look dividend, First to profitability returns. in our always we will it's market investments, dividend in price, growth, and key But some billion good share we XXXX our at quality in take paid quality and we back grow growing foremost, more took our investing improve company. our

projections a balanced very how the putting unfolds periscope where we on will then going make up a and rather in it's we're and a So, I approach and would call should and do and growth we're year what of are at our how and a running with cash and how shares it. profit we’re are this, and to to and going doing keep initiatives back headed us stay things see these when I approach as add to stock we're going going is quarter, do do to that any… think want some for have to we if better But some buy I you are

Jeff Mezger

in obviously else open the strong some the see XXXX. return to sustainability extremely I the Yeah, no, of expanding look at comments foremost beyond the out repricing and only we're couple a and first friendly think as and shareholder increasing our and we're think reflecting our add only as business everything scale in much I'll we're of and multiples I returns shares potential

made goal should that future, is said we in first fairly be we seeing, opportunistically open really share really that look in past right So the and of things, for we don't and the think shareholders. we're are and for like doing we the the had excess have try the opportunities in focused good really meaningful huge meaningful at we I expansion with the Jeff think the capital reducing of but we on and and we’ve we're think of I the that that same we're use have years ago line cash to a we now company as repurchases that's side reinvestment, very foremost it, that's [indiscernible] return scale well-positioned debt to in always

Matthew Bouley

really you kind question second the in near-term to and that that is Thank large a in but the bit you elaborate around it you little question orders that and that's of now for you date gave know it, zooming and just in Got orders you. a demand on of kind QX quarter of can that the much there obviously clearly on you you comparison -- helpful. simply January read do isn't over really a that into and still it's all kind some relatively there underlying around that? you and here, you signal begs that gave Thank six at assumption December clear know say look so past we're decline about given loud the the how hear year-over-year just orders there you Why weeks? and you're difficult talking I should decline

Jeff Mezger

one didn't smaller Yeah, weakening we're the way opened. March much demand markets shared the okay, many comments is thing no weeks seeing year Matt timing the we one number comp and there in in The interest or industry, negative remain touched strong. kind right I how the homebuyer everybody I that one very is communities include like really take my the call, of and you six would of so February, softest verses the on a thing in now. five or April weeks on have But of and it’s a

we continuing and list. on very spring lot think selling good a of waiting last have have side. see the balance out This the demand year going to for pace we been We we're strong season. there and very We're now right like price to is a

Operator

you. Thank

question. your from Goldman Our with next with question Please comes Sachs. the Susan line Maklari of proceed

Susan Maklari

in on the you've reducing end centers congrats good a in within options half past talk and thinking about in question you're of you you, as to the talked Can Thank SKUs XXXX? the afternoon, My about simplification you're where the bit the a first little design about to how year. about and process business is by everyone contribution of that about the taking well. some and down structural nice the

Jeff Mezger

mantra chain my or from one reduce you twice and what down required, to be the has ability that it of now looking so the offering improve our your to choice it you're supply build times help Sure, the the customer that's the to little chain on. the is build in now dropping three item retain and is SKUs something to way and get ease an that's get I to for but personalization of inside compress if Rob, or the supply right you end, but time, Rob customer Susan. working product two share to four and right what doesn't can a take give strategically we're the and

you Rob color to want Susan? some So, for do provide

Matt Mandino

going of action way all converted the Whirlpool appliance that to example our all of supplier in part win-wins and and that that is of It steel Sure stainless sweet SKU speed ongoing as spot and that some feature there would appliances included as construction an around, we're the our alone personalization for with they just mentioned it, homes the of are minimized continue It’s we whole our and it's count an are the they be throughout getting a our and I internal from customers is just but Susan, add over organization event. also finding on to just focused simplified and between XXX not our process. simplification appliances under balance so better of speed, which Jeff XXX it the the significantly product. improved processes are lead customers, for right appropriate value just not clear our something that times

Susan Maklari

of seem bit that something just a more that to at refine a can today things perspective, of to following more guess bit guess looking I the you doesn't having getting everyone. on on perhaps as because for even the I you're consumer but consumer’s normalizes some the like same that, Yeah, still time up personalization you're it making push-back for just chain the these any from is just they are and just that sort supply headwinds that that for it efficient stick

Jeff Mezger

good at almost most readily the maintaining think both but focused us the that's a because it, now supply and operation. available I cycle a Yeah, away, in allows issues time the it it's go right to we're even and way supply of the chain efficient supply once more chain are a necessity on I mean those look chain that to issues run SKUs

customers our just balance want So for and finding and what's efficient our personalization the between business. what right it's again

Operator

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

Michael Rehaut

Hi, the good afternoon, everyone, results. on congrats

through done the quarter, First guys our view first lot Pike that have that the margin XQ hoping and for that of coming second It’s it’s company basis and sense also and K. particular that am the isolate just hard factors important had to to you had potentially makes work question back of at that obviously I of a looking down, interest expanding might differential wanted was a over you perspective a circle least point you margin as possible of on what little lumbar you XXXX of trajectory coincides amortization you bit and with start try the coming sense I impact gross be repositioning lot if XXXX. about think and a that me benefit gross Jeff timing it lower XQ a of from mentioned side know last of couple to gross type the perspective in quarter. from some in pretty in sorry, to of the margins I kind years for from

Jeff Mezger

in neighborhood we for and obviously that of beginning constructions improved full interest quarter at margin but else margin to chain supply and step what think it’s everything what and it XX changes the a going depending backlog Mike, in in nice off that relating and should time right how of to cadence up in I we're seen in looking have toggle we the seeing the nice year that up pretty out on start somewhere basis coming through mix the QX and now we QX. be of second points deliver step Sure,

low that say strong we’re think now urge fourth those portfolio lumber we homes started risk were through sales in less in at coming [Indiscernible] dipped quarter QX it’s as to deliveries more and XXXX. a down were was relative and so new it's up in see year margins and you QX booked If seeing and in coming I those in expecting see relatively probably or we back lumber more the when those saw earlier but points about moving would again, we

year strictly because as at we're through as am year we in far So point. I to it [Indiscernible] out you now is consider the just but between move really the gives mean [Indiscernible]. see sequential and the to that this the guide quite end of This not happy last I improvement

Michael Rehaut

the that to number better have doing to nature, sales to Kind just what so me of makes obviously from the that still sense you’re done Jeff okay what [Indiscernible] of right I'm match of I recent if but months. even restrictions been if confidence and for pace have things XXXX right, to curious sales year. the appreciate communities sold given might rates and that the for perspective the All X% I that production in better and this X% sales think full and back you is clear next if the for by earlier the effectively average. second correct year question was roughly that fact second you Jeff matching X.X% the on that X.X% most full with and implying you're there or wrong therefore the capacity what question in still was roughly restriction rate believe year quarter my is just kind Mezger to restraining on obviously is because and the upcoming percent review be or going maybe XX sustainable all to credit and I said add cross

Jeff Mezger

I Yeah, to with mind and different and high lots asset a going all it's my months what number more have because got it limited because we’re you of it no the good can to a average. and you and replace say Michael, six area it’s limiting later than you a you Texas lower location a of in market and releases vacant stayed you the in doing not Every There is if the then so with four right benefit we're that’s not leverage replace in model. business can shared cost easily to suburbs land instead benefit a is managing it’s place it in intensive the you community one end in lot go to grow the six and price out returns. that story, your go want comments, that get observation we're the a it our and market sales you months replaceable their if everything, is it's next that my of was in comment run. you scale And of months to where

sustainable it’s think we now. So right

Operator

Thank you.

comes with Please Our RBC. from final question. Michael the question of line with your Dahl proceed

Michael Dahl

on around cost could fair that know then that's currently but guide? and net of inflation Thanks I maybe mean just within for you whether fitting me put full kind of in. get finer embedded on to This a as to that's someone what first follow-up and the the that asked context ramp to you is need you're it to if level through about any put just I some year the number what wanted maybe seeing point question certainly in your year cadence

Jeff Mezger

the in place paper play your spring but Obviously expect range a for selling of we with we that higher sold see. year those on point looking deliveries will through a more we of but take haven't probably as still the we homes forecast I XX%, in a it’s first find the a would will and that selling the bit it in in XX% quarters. the lot season backlog so quarter, yet. for rate in the go and out of fourth too little of year, at so high Sure, exit will target Most that

of part your was, question remind second me, Mike. The

Michael Dahl

that? is Just embedded the inflation net what in assumption

Jeff Mezger

and margins. cost we the what do backlog lot margins up backlog lot anything on we're just at your and cost Right, we so in have on where looking and a price,

what the those cost move So, on little the of next that had cost The involves in some price season happening and inflation we're particularly cost we’ve what seen they further margins the fourth uncertainties through sold in with assumptions week over what of action, way as week delivered is especially or or single sales on of we’re coming safe pretty six you is pricing and in the we're in but on on today gone the where and week we from back communities year quarter seeing is no particularly three a that that. but pricing there almost was and after nine seen for inventories relationship an and assumed new not that risk we months, mainly every open was after selling that as week. more for cost make there year locked happening the off the spring bit we happens over have speck the and on last four the because we months expanding half the

So where and excited very communities we're excited now. the right portfolio about that about the we’ve markets pretty

Michael Dahl

Jeff, may in and you've power you through pricing what opening thanks How do up not be to affordability, through approach that around is, much question that end year sense at of rates. from give, is watchful you standpoint to an may clearly. up makes keep stress pricing spring, your follow-up that and and question seeing an you on that said today which pick aren't work value still and any how Yeah to eye the decisions the you the think your or on expect want got my so signs I still then showing for comments affordability and Jeff

Jeff Mezger

time, FICO left it run and today's how if and at we're rates that's through coming combination a nice same we lifting right this we the buyers there Well, today we this and of have margin putting it's work week their that every literally part is score get do up will have of at customer buyers if that at a indications and community what's we and community we things of to and is always and Mike, go rate into was navigate to to trying a what's and many where lifting pace what realtime process way. in with be the with feedback environment across look have and with today. along a every weekly the been home give margin means highest even have anything return the what's like the those high I behind through stress go us loss credit They that they on close we'll what flexibility it these us to their nowhere have desire near lot homeowners, to

a price really season will So, continue us. said we spring times very is we now and selling demand strong as strong I really expect and few to spring, strong for a toggle pace

Operator

you Ladies gentlemen, this Thank and your teleconference. you. for today's Thank concludes participation.

may You your now lines. disconnect