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Meritage Homes (MTH)

Participants
Brent Anderson VP, IR
Steven Hilton Co-Founder, Chairman and CEO
Phillippe Lord COO and EVP
Hilla Sferruzza CFO, CAO and EVP
Michael Rehaut JPMorgan Chase & Co.
Alan Ratner Zelman & Associates
Paul Przybylski Wells Fargo Securities
Nishu Sood Deutsche Bank Aegean
Peter Galbo Bank of America Merrill Lynch
Jade Rahmani KBW
Carl Reichardt BTIG
Daniel Oppenheim UBS Investment Bank
Alex Barrón Housing Research Center
Call transcript
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Operator

Good morning, and welcome to the Meritage Homes Third Quarter 2017 Analyst Conference Call. [Operator Instructions]. Please note this event is also being recorded. I would now like to turn the conference over to Brent Anderson, Vice President, Investor Relations. Please go ahead, sir.

Brent Anderson

Chad. you, Thank welcome third and analyst to call Good and to year-to-date our quarter XXXX discuss morning, our results. that along We of issued and the during it, today, can on or bottom our the market the referring website slides this with at call, the press the you Investor release can Relations our before at we'll homepage. to be you investors.meritagehomes.com, opened select find link well operating during as Slide to and you this X, community slides, call statements forward-looking closings, projections as as count. press I'll including refer you and trends, contain the that remind margins, and metrics, release our our earnings order revenue, statements, for such XXXX time, them. current of represent Those and are projections any no management, opinions other obligation to we and assume at update subject the any which to change forward-looking inherently are different our expectations. made and results than actual statements Any be materially uncertain,

our on recent on Exchange listed the our report as Form well We risks. results a actual have XXXX which more subsequent the Commission, that XX-K in contain and release our identified discussion may Securities detailed XX-Qs, this annual and slide with influence the of press risk and them specifically factors and as filings most

Hilla non-GAAP have our results of as press are Steve financial Chief We of Executive Operating me Meritage President Lord, and Chairman in discuss President to Sferruzza, closest CEO; Executive With Vice and today to Phillippe Officer related reconciliation provided related to also the release - referred a compared and measures presentation certain Vice our and GAAP Homes. CFO; and measures. Hilton,

an a X our replay results. Steve? call remain within this on an quarter now hour to third will approximately it our weeks. turn to I'll afterwards available be for over Mr. and review to and hour, active website expect conclude Hilton We about

Steven Hilton

Thank Slide participating today. and on to welcome begin X. in you, everyone call I'll our Brent,

than and the of been and quarter certainly hurricanes of relief a although was homes weeks Houston one, We've damage, our growth and so, X% The still in more increase to with the X% home sales our hit have in pretax little which earnings overhead leverage, we're X in team lose Even for quarter grateful communities relieved did homes been construction which more third activity. without disruptions. and in closed last Florida. and home efforts, we escaped double-digit that third margins quarter. gross sustained assisting that third did major closings sold XX% combined could our and closing injuries quarter The we gains X X% generated increase closing the improvements an easily those we to but XXXX memorable in with revenue, drive members year,

set X. our growth. this a community They earnings count, than margins our with out line our quarter count Turning growing We've increase in ended more gross communities by grew X% year first We we quarter third year, top and X% and active enhance had the X improving initiatives include, ago. average this the of strategic to performance. our year SG&A to Slide with our community with leverage

specs XX.X% and power pricing Our by home cost third quarter XXXX. XX.X% expenses. good XX.X% closing in overhead of to management, the driven modest improvement gross of from margins quarter margin was improved The improved last on leverage construction in and

to them begun on and with negotiating aftermath and we're some increases the future in expected widely subcontractors, been of minimize receive the from storm cost notices has vendors of margins. the adverse As damage, to we impact actively

third to dollars, were actually down and year cost Phillippe I'm and our X% on last basis home to over X% by and expenses leverage by overhead our the other the the in I'll a year. compared turn trends XX.X% to quarter team rose for higher our quarter. discuss revenue, sales third last year's and year-over-year the year-over-year for XX improved Commissions also market. determination closing points it SG&A was We the this increase sales Total detail third in compared XX.X% our of to G&A caused storm. volumes. in growth despite X% to more orders despite deliver of absolute sales quarter proud drive disruptions closing by Philippe? just

Phillippe Lord

year-over-year reopen to Demand buyers quickly order in growth Florida, we year, began region quarter achieved we Houston in 'XX. are community The solid able and Texas quarter the to and mostly communities The and in I'm Thank West decline this opened Steve. we quarter you, to flow third was the our been XXXX. third to again. in fewer to second were how due 'XX primarily our has and was returned continued pleasantly to East. where sorry, X% demand in traffic than strong due surprised having

a average Arizona, the demand absorptions for count. with pace count communities them. X% As slightly community replace direct were Orders consistent. orders X. offset the corresponding The could region robust in demand up quarter, the are limits I'll selling well. remained results in a under Orders while strong a in community decline several in loan last year's compared X% entry-level in where overall while to than third we increase average West, X% up our FHL Phoenix, closing faster was in X% decreased you homes to decline in Slide

supply more to Orders XXXX XXXX. year. from pace healthy with on third current demand down were average, that slated opened, communities during a X% open meet communities the have of entry-level of in in California, at this with X% We the selling, to fewer for lots quarter many

on caused lot we've quarter, communities years in As plan next last Colorado, during new were of of the highest by year directly last in XX% delays quarter the several our heavy of Colorado, any in open Northern to month the fewer of XX% a the average northern absorptions than in reloading and or Despite in Thankfully, demand our communities through the over a quarter wildfires have lower quarters, impacted company. by decline few California there active still our after southern continued orders strong we California. the - last none absorptions to Denver, combination and third X.X noted supply been our of in due couple the rains in been average, in communities, over per were spring. XX%

pipeline solid communities of a including planning have that we're next We quarters. new the few to over open, several

region at was increased power were order region, to - in selling orders the to be have XX. down to there. we While first-time results. across starting a as shifting lower sales community more since despite Slight contributing recent Slide continues the our X% best buyers. are performing prices X%. demands decent strong for And aimed larger total region, been value order towards average the down our Texas percentage pricing only the is tamper, price Arizona X%, markets price, recent Average faster all due

last reflecting Our absorptions. quarter, third during a average in XX% in in by third quarter offset the Texas, over orders increase communities a were quarter year the average up XX% opened decrease slight

third of were over the including flooding Texas quickly year's last All rebounded after Houston, quarter, markets hurricane our which up and subsided. path

Texas was, didn't, has here? they A our strong it when part The buy. flood lower Texas, products ready been year-over-year. success visiting sales first we in success they're more price towards price question people Austin our in any of down of this large entry Slide did Because to confirmed, And was average of number the especially to when points, year. our due X. asked in level made X% the communities we've at pivot that

were Our up absorptions. last orders East due region XX% third primarily quarter, year's over increased to

for quarter growth I'll communities community growth our at relatively We're projecting by XXXX year-over-year, our to schedules are with now and top on to by up benefiting year-end up last earlier is ready count pace our XX% were flat orders anticipated over and were also we sales us Florida our Overall, and Part per our sell, average well been count the in new which a especially to quarter more communities, Hilla? comparable California to due while and double-digit absorptions to plus in and earnings communities, a higher buyers, strategy count move offerings and it opened our mid-XXXX. Georgia, be we're entry-level market. new management has achieving that were Now total due get or the well of third community financials. it community core community anticipated Georgia of year-over-year. to XXXX, the over to or and review closeouts our our of hand this fully communities. and back Florida's our than year. on in than to received from entry-level is average which executing up execution. of is growth successful in been Florida, than Live XX% margins but in improvements focus expect where orders be of longer will Carolina and part Hilla products order and Our new South entry-level improved have better Florida, communities

Hilla Sferruzza

you, in quarters million over quarters for XXXX, results and increase balance net Thank X first as earnings XXXX. I'll generated sheet of $XXX as well key XX% of recap on our land and metrics, X. Phillippe. Slide beginning the We the X year-to-date a first

XXXX closing rate overhead energy quarters leverage. XXXX X for by partially driven not offset tax in our the gains which of a of year-to-date XXXX, in Those our a our earnings the year-to-date first higher tax year-over-year. increase Our improvement was rate. has up XX% On XX% XX% revenue were a performance tax XX to Commerce home basis, X% pretax XXXX. by primarily in bps year-to-date were reduced compared and credit renewed

to sell year. is markets homes. General mix for $XXX,XXX shift to compared depreciation was a price overall more we as occurring first of of closing average many last X that home $XXX,XXX entry-level offset transition XXXX quarters Our price the our in

lower year, Our second first of year-to-date X we of quarter XXXX margin. the last than quarters lower the due gross our gross was first margin improvement coming third to solid closing sequentially than entirely in XX in and XXXX, home achieved quarter while bps

as home believe margin, backlog XX% margin prior Potential a quarter closing disruptions weather-related target consistent closing have despite we full XX.X% time. mentioned, guidance year of quarter doing We XXXX, Steve year. volumes to expected the XXXX we XXXX our this with to for XXXX, our the hurricane and XX% to the we to the X increased first in our in quarter otherwise quarters closed in these expecting leverage achieve gross fourth had quarters generate labor. fourth XX% as of some bought to we increased of leverage SG&A focus of first third closing XX.X% of incur we're XXXX. materials still the of of revenue we're home our As and in labor aftermath on getting And the cost from could minimize increases year, dampen best can on we in this demand result to a our would improvement, increases delays XX.X% homes as but the X the for expenses the from SG&A down gross XXXX

percentage in goal SG&A higher to towards and XX.X%. leverage lower as our our quarter, to XX% effectively expect fourth the we make even We long-term closing progress be volume of

used reduction year fourth of the from this issuance shares go-forward of in year quarter senior issuance in credit facility which interest XX% most $XXX our first down On quarter interests of million of $X in Our revolving higher the approximately development, basis, place, ended greater from count. we the X through the senior share retire quarter off X cash debt We September. completed new new facility. of in on new notes 'XX, and over of million interest under We $XXX.X our our million of drawn the new interest was that borrowings under proceeds million year-over-year, $XXX it credit this the completely expense senior notes, million anticipate quarters was June. we the due $XX assets Slide to the note. will million third convertible nearly pay its and XXXX amount for higher the in a from of to with our XX. diluted against the on the result of With larger capitalized additional though on of the expense

inventory, spec increased of slightly, within but the entry-level additional to more mid-XX%. in the our communities, in to low net to XX.X% so specs in to quarter and at move-up allow XXXX. carry specifically year-end our buyers cap debt move it's invested at ended was compared Our usage range have in quicker. current cash we as XX.X% of our target Part communities, ratio still We our

to quarter lower X,XXX with XX% were which at XX% allows third our within strategy per compared efficiently, and spec year in more We in in of completed Our cycle. us the faster X.X of average 'XX were spec XX% spec third cost ended build communities. or per the Live Now specs of entry-level more community. the closings in ago, was specs compared locking X.X the approximately September total under to to of third driving sales only XX% a cost and XXXX, about from community, or in September quarter construction, an X,XXX our the of while to completed XXXX XXXX. end Approximately specs from compared quarter reflecting

ever development XX. development We development we've this million during last the land spent to $XXX Slide to and we year. spend next which which more X,XXX to We're moderate about a for quarter, expecting over expect approximately billion the investment the and on fixture approximately pace on that $X annually, to is than during year-to-date of bringing quarter XX% compared the entry-level third additional the most couple lots land years. and land quarter, were year, and Turning to and spend of million million XXX of total communities, during in $XXX

to of XX,XXX approximately land which With at for on our having have it to X.X we in over lot. heavily last have of to development, years of we month outlook. years and meet plan we XXXX. We based the lots on XX all X.X year back over that, X supplied years, After trailing turn we believe about quarter I'll the with supplied need what equates and need full closings, lots, about XXXX, invested end, in Steve lots our discuss XX%

Steven Hilton

the Concerning - after the and after the expectations the revenue in our strong from reducing guidance, hurricanes, tightening quarter year, expected our third we our closing X achieved results are Hilla. first impacts we of you, months modestly expectations XXXX performance. while Thank earnings the and

closings million More we for margin Meritage we to it be quarter billion will healthy is up volume this is on closings We of quarter. all highest results in homes for $X.XX especially those Midpoint to million to across ever, $XXX In our entry-level to about to the that be we continues the the approximately expect are pleased energy to buyers which of of advanced for the difficult quarter, in our gross them earnings, and the make lost our with tightening closings the to revenues, are year. strategic projected getting and line pretax with X,XXX $X.XX and fewer our had revenue markets, full and to deliver priced since progress that initiatives. expectations our achieved of previous year convert made Demand XXXX. efficiency for than Live we due the homes. we fourth hurricanes closing billion $XXX X,XXX On quality, and approximately for sales technology XXX already level and Now summary, in in third in appreciate XXXX with homes. affordably year, year,

foresee and delivering on operator interest additional it give and We'll instructions. to customer Meritage. satisfaction, we of We're better, entry-level feel to supporting our expect focus you and to the you drive growth promise for brand to additional and of for our Operator? to strategy a growing shareholder value. in questions, Meritage your opportunities which all open will we for we life serve and dedicated Homes we market, growth Thank for our up and continue continue customers, now execute now success. growth the As innovate our will for

Operator

[Operator Instructions].

The with will come from first question Rehaut JPMorgan. Michael

Michael Rehaut

taking appreciate I question. my

believe And bit flattish the trends, of us. XX I think growth should of you're but to in that due challenge year-over-year you entry-level bit just absorption of perhaps would the look about good community months. of absorption little have is the this count down or counterbalancing know you last - imply perhaps have in flat little some be have how trajectory wanted with help thinking? XQ, as little entry-level what it out solid fourth your mentioned in or I that through? a little more sales year-over-year know XQ, you've could would you a little in over is quarter. directionally, come more down count the using a or you're with a count, it's half having drill to problem, to as probably I is guidance, the kind that been of that for you so in we average that a said kind premature a community curious XXXX. first that X% would year-over-year a lower I product starting bit? up believe terms XX, a into I community rolled accelerate product have you If 'XX, be that might bit First, of the which bit have to I'm to success about

Steven Hilton

some we Without that here. more accelerating from our some in above West, And we entry-level the particularly under right California community communities, opening not getting absorptions. Now We have been increasing more focused which getting we're in of put FHA higher-priced and and Live of. too on communities, communities margins, are think granular, had count absorptions. We've help our our will our growth Inland our pressure that higher-priced Arizona out lower we're exit

and I not there's community growth we're fast So that's focused possibilities like, on. what we is as as count better do although our really think absorptions, for

Michael Rehaut

- terms little that, year-over-year thinking be result, would year? in my drag community XQ? the first year-over-year of right did count catch the And in I And half should you it a right that a flattish that a bit of it as of about it said for in

Hilla Sferruzza

this beginning be going to It's flat the from of year.

much of becomes level year. where discussion into than Obviously, about both and not pretty move-up basis. mix, we're it ready started I'm we bit higher the first as entry pace material quite driving community year a our sure our count next more traditional go to is the their of portion half closing absorption we'll sales So a to products. a end on

be we're than So to count to we I able community anticipated. had manage a think through lower even going slightly with that, initially

in will those be XXXX. communities, the pipeline, obviously, Although opening throughout

Michael Rehaut

Okay, good.

So at I Dan, what thought. in that mid-XXXs not misheard flattish that's I be you year-end? So the would

wanted to - get we did just a gross bit same at sense for the XQ perhaps, a I bit in XQ, from material expect a what Second areas. you believe, gross what costs out is and the impact do you gross down were well. be higher sequentially? above question that margins. you job the basis a costs impacted margin, negative point, labor of material bit from - of third time, But as hurricane coming a that, sense impact of impact out expecting a little on nice And result from our quantify a maybe expectations, a can I give called little us of as - a little quarter on margin labor a of to impact margins you to that the

Steven Hilton

to quarter, At slightly from down margin. very where the precised point, could was it difficult the be in pinpoint this it for the It's fourth third quarter.

want On it's it to in a on number, we've why closed. be other range. But, in to I the continued don't to any right And precised going event, where the of third it was could the use be hand, hold that's out just top quarter.

Hilla Sferruzza

at to well. to a hurricanes, something, dollars uptick the are fairly we kind going that make percentage. have cases, in think you number have we in sure margin quarter are this remarks Post tightened what But in sure closings, side XX.X% as cause so make slight started be to we QX, year labor is to that I don't were obviously mentioned in full which the of that closing job the but we're some need doing gross our where our backlog we site not do order to but our hover going homes most full we're of why very fourth already we're of year our We're in a getting to labor, in that are the at comfortable may to being environment. around in XXXX we definitive prepared construction

Steven Hilton

selling this will we we're that. very we're specs And And still that speak today focused as close year. much on

Mike. thanks, So

Operator

with And will & be Zelman Associates. from Ratner that Alan

Alan Ratner

I a you obviously, results. seeing certainly So nice into your are guys, entry-level, that's move benefiting think and

really as could the pressures, lot think a I power the a hand cost constraints pricing other if buyers. one affordability strong, of I'm like extra at demand, hear you've we'll more little it you need given lot But the be just too well. seen entry-level. bit careful sure from I'm hand, not about it those but seems like curious talk about On builders hard, of the you about seems pushing the to other is on demand

those are you talk your just do curious year? do on aggressive prices costs bit you've just what to so been little communities the may how be far consumers? opened if costs, to think a So this see And about higher you've on you ability pass raising entry-level

Phillippe Lord

This is Phillippe.

our seeing point. at The entry-level, FHA. cap. of a the just as see hard to that We the pricing lower cost power is kind are price our of Definitely again, able We key be absolutely. ahead

below price strong are And point demand. get But we we are seeing to at that absorptions. power and to as FHA, FHA, pricing can where seeing the lower really we're points impact once it we power pricing FHA, so positioned

Alan Ratner

to on portfolio push your them give prices higher? budding can right at Or to any us I are entry-level limits if your indication in how kind point, against Phillippe, you FHA of And you that in you close I of projects, those mean look run, Is projects? need of the do to are communities? of if room there you you up mean most

Phillippe Lord

And market others there of markets, below, we can kind the hold line. and Alan. by It's were to impossible it. kind some market, tight we're of positioned and In push

Operator

comes Fargo. The from Wells next with question Paul Przybylski

Paul Przybylski

you a think increase, us towards margins thought roadmap still possibility, within back marching good gross to year, range. Do and realm the this of a earlier XX-basis-point that's for use? was annual Steve, that XX% XX% you to

Hilla Sferruzza

for we're were we I still what get next year, margin year. gross on but That's we're it's to pushing some towards, hoping not day what's gains focused every this here. mean Yes,

Paul Przybylski

absorptions guess of it? margin do And compared remainder of how to look Legacy then there you percent And the in has trajectory of region? the and the East the transitioned? the that portfolio And of transitioning gross at communities then community I what been are or the new

Hilla Sferruzza

higher. they're better, They're

into a getting You hit that yet as out not it's construction factors so drag. better, that factors process communities volume we of But the build more of expect know the is we need the margin. over we're And a somewhat improvement the gross quarter which more and But to get certain we region. certainly overhead of on a that next incremental that's play every going to years. of out couple leverage

Operator

Kim question next be from Evercore Stephen The will of ISI.

Unidentified Analyst

is lots. you on as up I purchasing mentioned thinking. trying a Steve. up under revenue to that refocus land for spend, you're of cash follow you This want just percentage on catch to and cash to flow quarter from flows, Last wanted actually as on

all? thinking Just at this wondered changed has whether

Hilla Sferruzza

I don't not think focused we're that flows. cash on

very we're on cap ratio. kick flows, making While our our zone off sure comfort to debt we're cash net focused on don't to very, hyper-focused over we that

we Although refill depleted we realize had and need of that of lot. a quite pipeline did bit built to had we that cash,

years, think need done good a we've to the to. us X job getting I we So back last over where very

no trying longer underpurchasing lots the growth prior trajectory also need line replace not to of but we point, we're that with a providing and in selling replace this years. our internal we're to at for forecast, So

the highest ever year purchase the SME had we've X the we So history for billion this company. is mentioned in of to

that a So we basis, purchased that tempered very that. in a we'll excited, replace than on little we're more knowing under to seeing don't year, something need go-forward be

Unidentified Company Representative

get Clarence, of improving land. going more on I focused money We're think so more without, our communities on out forward spending assets, we really volume can our

revenue so we And 'XX drive spend acid-base, we're year years. projecting between beyond. we the to about a as have though for growth these and and Even into next think higher us same land be can

Unidentified Analyst

bolt-on to potential markets your And into any a expand to then or the M&A to grow look new opportunities as existing at you ones? expand within see, or entry-level

Steven Hilton

South that opportunities. in eyes we and those Phoenix I more particularly always to Our opportunity of are for that we older markets, the our longer, those businesses those in in kinds have like and grow the grow in markets, Dallas, of And Houston, past, in open lot thing a markets. Same existing mature even market or can said our gain business our share.

our our interest it comfortable growth, nothing organic, open but So the opportunities are make is and we horizon to at that. definitely on eyes internal primary But moment. sense, can as there's this pursue

Operator

from The Nishu with Bank. Deutsche next question is Sood

Nishu Sood

up So materials the cost margin, in to following pressure the labor on the just gross pressure.

seeing seasonality you Or it rebuilding quarter? do now greater we talk laid people, closings pressures plays think, clearlyX do kind it pressure you an timeline, in peak? Are XQ. Obviously, fund I the the to about the the think think pretty trajectory this, people when quarter. about obviously, that first in flows, you potentially et Broader that. with out XQ. thoughts a into on insurance in post different of for cost are given is that question, bleed fourth well, And in, cetera, in storms, obviously as the like event of accumulate. thinking I role Depending rebuilding expect activity

peak do it how receive? think Steve, to when you be when about that that, So begin pressures in unfolding bit the in those might and

Steven Hilton

I It's Northern event, road mean, is not, I lot it's other to least is I at the Concerned I about prices regional think a think burned - longer. on probably up be a if are in houses a I do down But national the Texas rebuilt. And think it it's out that's couple than there, markets. think too in there more up hard a a tell. this they got with California, to few going of be issue. And had quarters to

is pressures pressures to Houston So national. cost quarters. But focused multiple Florida going play think several really again, quarter. over too the these cost are I on fourth out the not are on and much

Nishu Sood

Got it. Got it.

Okay.

the communities there Turning the And this below the absorptions you've effects had X X below in new opening of opening and still the entry-level there of kind mid-Xs, on great should absorption Is that? should success region be communities, the we east How your well. even at about have an region. the or perspective. higher there obviously, look we is absorption where if from I West were the think East as Obviously, But new could expected I pace, back? storms. entry-level because to might potential it the get it's calls Texas. behead quarter How about about even and the think it region. western Texas smaller communities, turn of some might committees with would mix, that communities

Phillippe Lord

It's is in and starting really a Phillippe. things We we're encourage Austin, pretty move and always now San entry-level been it The people had Houston. happening that it strong some Antonio's in access market. to in Dallas to way also primarily

So Now. been in I go community and in further there. should per up absorptions West. But be segment to East comparable the into Austin, very that you're mean, pivoted our as Houston, with the well-positioned has strong Dallas we and more pivot think you expect we're in we the where seeing absorptions what to Live our I and

think expect what to should you that So see.

Operator

Macquarie Suisse. from The Susan next Crédit question with is

Unidentified Analyst

what do When back [Technical to to to Looking expect deeper want those limits. FHA approaching just you price able to just on drill what increases bit little deeper are a is communities increases, into have This conversation push on? supplier drill on the portion Susan. guys wanted to I there those historically, Difficulty] on back typically those in on I Klein of hitting Chris little in you been a for realize? that into you communities go

Steven Hilton

less less committee, simplified and obviously model think matters I mean, entry-level we that really mean, by have floorplan. committee. more in more specs I don't options, a I building the

And push back - But so we are the mitigate us to don't other communities we that our harder cost our communities. of those we're business allows because to unable model. and any in in then

Unidentified Analyst

Okay.

still So then, in given hard able price, that that on are to you'll the regions? those you your on cap affordability side, drive expecting closing growth expected be that

Steven Hilton

far, our FHA. our manage those to support manage there. we for we're still then and pricing and carefully I we mean, frankly, price But think and generally, I we FHA. how remain Yes. to the entry-level to lots really what costs our do try able stand about costs communities very in it's buy if to can to, our There's quite a lots of position all below the things our push thus point. we communities, That's pay land

Operator

next from question be Lovallo America. of The John of Bank will

Peter Galbo

I I in are forward towards who's And Pete that a here. going Galbo options? you on last could users of do Steve, John. the actually you builders. option of your very guys sitting out are option lot have to of do you for there in going terms bit might It's among would highest you you more one how other Historically, was year, of lots going if a the around competitor was the give us model wondering think little XX% a you mean, terms of you and impact what publicly look today. target in profile guys turn the And have just forward?

Steven Hilton

last wide spread is been being they do But really did further this pretty nice where the using in margins traditional between a - Orlando, the we long last locations. seem the million to significant are, for watch two have worth cycle, about reason, with of our lawmaking, some pretty the first our on Well, in and want transactions of put we going we closed they million $XX information those pressure think balance landbank that we which of didn't often and to cost have to Both or margins. probably us are sheet I $XX great quarter there. results equals think or October may term it all, the

kind a prices for to capacitively options that markets, from hasn't been cycle. we than particularly available. in Glenn Sellers, those And last available certainly using in the costs but today advantage in us much down. just the aggressively of as most the there not find just West, fewer banking we extent then in done land there the reframed all lot is So from on take weekend, And there's of To Texas was previous as lovemaking we've that cycle. could have

like So don't fact available to but just of for at with there I of that us. certainly, supply. as an do area a our extent more that would hurt focus are margins, they

Peter Galbo

Steve, dealer. the at kind those all could spread just of on it. And the ballpark that modeling landbanking maybe you for Got then one and if

to have cash? XXXX, pay on maturity you that debt all, the plan or at On [indiscernible] outlined guys refi not you whether or

Steven Hilton

cost IRR the X% from issuing I mean land And the range. making bonds to XX% to range. XX% we're X%

So pretty spread. big

Hilla Sferruzza

Okay.

credit there look I they're as on XXXX the the for and is think I a at have capacity most XXXX, earlier those at looking at if a running out sure our we're far discussion As the pick when will point up look see cash QX bonds, we've an count make those it want mentioned competitive it before, question. market still and do to market something just to to of in community I that clarify about likely, options clear. do couple to we'll bonsai we operate. different data although one in was other in available want taking facility revolving or

X where XXs year, year, low full our count, so low to not as year okay? started clarify, expect XXXX community we which of this We just be X is XXs, this December to out

Operator

will Rahmani next KBW. from with question be The Jade

Jade Rahmani

labor Just given off-site? of to house any you've off-site see any shortages. to regarding if the pre-constructing basically solutions, the consideration part Wanted innovative

Phillippe Lord

to help other through off-site. Yes. beings, training, innovative a at quite It's looking ways manage build environment. approaches, of This types current Phillippe. of panelization, different labor lot to is the We're different frankly,

it. In everywhere actually are opportunities running So we're markets, sense that, the ability to we've doing a where Antonio, where we been couple to make and exploring say it do execute of a how at have looking San of models we lot in I'd on that. those areas, and

Jade Rahmani

benefit a could San on magnitude And you've initiative this margin any you of on widespread can also, become And Antonio experienced? give basis? national in the how color that

Phillippe Lord

margin time, it's leverage to capacity our type would savings much And lower higher margin. not you lower translate about things of about certainly It's it's the the about helps the our waste. real which which se, per efficiency a and costs, cycle as help those does and warranty cost But it's overhead us. field efficiency for

Jade Rahmani

of cost can range hear a the terms in - give a of then sense from you've started or increases magnitude percentage basis? that on vendors, the of to And you

Phillippe Lord

- depending market, market. the the it's on the on sometimes of of Because depending really. market Not

in different very pressures So to areas from quantify different different trade it's we're that. hard groups experiencing and

Operator

[Operator Instructions].

Reichardt Carl Our next with question from BTIG. comes

Carl Reichardt

percentage was time either want to your define or I'm What quarter sorry for Live however, deliveries, last same please. were that I Now if And first versus missed or orders year? then of the this. this EL or, you entry-level plus

Hilla Sferruzza

first-time about are which market, entry-level side, the was XX%, number XX%, consider that on XX%, on that order much order this was or is core So XX% Last pretty everything the move-ups, year. we entire year, side. more

still bit On little that. a a it's a of down obviously, the couple of from shift have closings, we points percentage just

group this entry-level XX% Live closings you're about group, If about believe, up year, that even looking XX%, for in at last the quarter the just Now I from just quarter. to third of

Carl Reichardt

Phillippe, what's just then and execution on bit absorptions? And about very which just is XX% execution. improved help to a is And product, I initiatives part drill talk the the Can a part up there wanted those you absorptions, you east bit down good. to little mentioned

Phillippe Lord

in latch evaluated markets. those Meritage Primarily, teaching the sales specifically which training floor, acquisitions. were Greenville absolutely. team Atlanta, of We've Yes, a the legendary hired on across them in all new way. We're people we've those our markets, but we're the them, sales really sales

sales leading. some And sales talent focused management really teams on of our market. sales We the we've in we're in those have made those some markets, team improvements. coaching leadership currently And executives guiding, and our training, the developing, of

have we really over go, think to we get better do because a I are we even to and quarter every and expect better better. We can doing, translate see that I than ways

open committees and So ELP were and communities the out have our where seeing We and better legendary as the communities product you with opened then and in products, with up Charlotte, execution. legendary what's then, assets. our are new communities, And new absorptions. the stronger rally, seeing that's now mostly the and and in committee absorptions with Atlanta we that and and sorry, few going specifically, few communities Not on we new we assets. the of management they're those mentioned, much the seeing

Operator

UBS. [Operator with Instructions]. Dan It's from Oppenheim

Daniel Oppenheim

margin the that it closeouts there. communities? homage lower from absorptions comments still impressed terms about out of exiting about just Talking the you're do the margin terms margin West future communities much in the you or the favorable was think where accelerating this was of of up. How was impact from how In lower in closing of opened getting quarter those

Phillippe Lord

quarter probably more I XX bps. same. through the you this we to the we're pressure but about about going will guidance it's because bps XX on a next it's give get quarter, about previously, of that better talked and think, I on margin, probably

Hilla Sferruzza

little will be bit It still By a it end the of will XXXX, XXXX. be nominal. into

Daniel Oppenheim

it. Got

- entry-level, [indiscernible]. of terms do lower about replacement a terms in then count presumably terms overall And XXXX, terms could in to in in and communities the that of up the of will offset talked communities terms Okay. the the opening think opening so will we've in of the you you'll majority of have they're otherwise, be, what community in of potential communities as be as mix up of potentially what vast having lower community

Steven Hilton

move-up historically count communities SG&A, on our though community we cost, going we've the real a better, what drive top a last than as absorptions that per-store been the subsequently had to line. saying that's those many positive on are and that's hoped, communities. forward, also to growth the are impacts that the quarters Absolutely, going much the communities, isn't going the been as absorption basis, in even higher. It's have because is over and in higher those strong hasn't And our

Operator

be next Alex question Housing from Research will Barron Your with Center.

Alex Barrón

have tax rate. next to talk the bit the you slightly guidance wanted lower about what Just little quarter? And drove this a Hilla, kind any of for the quarter. do rate

missed Sorry, if one. I

Hilla Sferruzza

tax We're between effective great targeting Sure. Alex. full cover. XX% year question, still It's rate. a and We didn't XX%

a rebates decline additional some tax years. rate pull to in were have slight able in energy We from we green efficiency prior the this quarter,

has - not you XXXX know, rate we been our recognize tax so of tax yet amended the can't closings. As fund for any the XXXX,

years. period, homes go qualification prior our in Although requalify we can still of and some have back where a back we look

take have that rate for and this do 'XX actively 'XX closings, to continuing we're that down So which quarter. helped

Alex Barrón

be going Got it. the still right? And quarter, down count it's next a for little share bit, to going

Hilla Sferruzza

Yes.

X.X convert at took reduce XXX,XXX going look is our you during count, this that, piece second but share day, it and took the in, to about shares. bps year, we're our the because the share full of balance the shares. about million tough a by we of average if full by result share our all-in all of million the count just per jumped So quarter count out and under out X.XXX kind quarter, the diluted we taking it's X.X, But for

Operator

back question-and-answer to our the any turn remarks. Hilton conference over to for session. concludes closing I'd like Steve This

Steven Hilton

earnings much for this forward Thank to thank very call quarter. participation very February. you you our in your much. you and to look attention Well, We again in talking

Operator

conference now Thank today's attending you The has presentation. concluded. for

You may disconnect. now