Loading...
Docoh

Meritage Homes (MTH)

Participants
Emily Tadano Vice President-Investor Relations
Steve Hilton Executive Chairman
Phillippe Lord Chief Executive Officer
Hilla Sferruzza Executive Vice President and Chief Financial Officer
Ivy Zelman Zelman & Associates
John Lovallo Bank of America
Stephen Kim Evercore ISI
Carl Reichardt BTIG
Adam Baumgarten Credit Suisse
Elad Hillman JPMorgan
Charles Perron Goldman Sachs
Jade Rahmani KBW
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.
Operator

Welcome to Meritage Homes Fourth Quarter 2020 Analyst Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Emily Tadano, Vice President of Investor Relations.

Emily Tadano

Brack. you, Thank the everyone for discuss just but results. now, fourth We welcome technical to morning XXXX year and and to our good quarter apologize full difficulties analyst our call release issued yesterday We press after market closed. the the

in page. the others. tax COVID-XX, link community as well share, are subject You to well our we other to accompanying of that as inherently of statements at regarding disruptions call our diluted at potential which full-year release XXXX the as by we at will on statements selecting economic time, any rates, update Any statements, of by during absorptions, home slides first investors.meritagehomes.com you to change can bottom call assume along or this Please the the refer forward-looking market, Slide it the gross cautioning changes revenue, and rates as expenses, and projections this slides current including website X and and opinions conditions them. margins, Those are quarter represent interest projected press business find refer obligation but to our health with management, to to SG&A forward-looking and home during and and contain housing not the Investor the uncertain. count per any our earnings no the limited and closings Relations views

our slide risks. on Commission, as of quarterly with Our XXXX listed the this identified our factors, Form Report as have XX-Q, of our due more in contain which and most and results expectations a reports which to a XX-K actual those Annual discussion specifically detailed be risk and filings and on Securities press Exchange wide variety materially subsequent may Forms than different on release well we recent

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

We approximately Steve? our after about the remain last hours A we available within call over to XX. Hilton. website this it an active replay will two on and I'll conclude be February expect call to now turn through Mr. will hour.

Steve Hilton

since Emily. quarterly everyone participating accomplishments by our you, on trends. call to Thank to are our Phillippe XXXX current across being pandemic Meritage new and We in XXXX. in home the individuals month for so operational financial annual best pace records the year great industry for of homebuilding in the quarter provide you and families the the and high Despite a safe during many the start a particular. overview XXXX healthy. stay cover turn set sales bar like welcome orders hope affected average XXXX market every and strategy brief today up your of our will ended significant I'll to X.X absorption a and I'd our will that continuing our overview guidance. and that year culminate and and impact globe, performance. financial closings and all-time gravity Hilla and giving and for of quarter the per

our home. our the as beyond we year. innovation strongest home construction, offered And margin and with which annual XXX% advanced XXX,XXXth in the gross our home commitment company's for We Even experience, improves most We our contactless closing residential home. history. rolled balance first MERV-XX keeping greatest efficiency, today to we sheet income energy air were customer within air and XXXX selling closing was home customers. introduce gross out system the profit the and industry revenue also leader to homebuilder And in our the closed and and quite delivered closing the controls statement, annual exchange a enhancing to nationwide, second the filtration

Our to models earnest met money agreement, we our and for deposit, electronically mortgage home sign it. the our begin allow search the home closed earnest their our a virtually, even online, buyers to qualify sales safe – home and online closed to can

We to We with way Meritage. began on to and helping those are pride and to our improve we dedication College you continue nationwide, throughout donated interact Meritage to that million the America our the organizations. communities non-profits on to with more employees which partners partnership with driving fighting this equity digital share live have to see enhancements $X.X to We'll customers, focused initiative trade we racial and as year donated various our Benchmark fostering XXXX. line homebuilder received and we Meritage on affected to in by The Avid separate over Cares eighth promote and healthy homelessness. focused marked Feeding straight and premium Awards In United on Negro the a work, with Foundation Gold are across customer nine satisfaction. Diamond, like COVID-XX, for Cares award-winning reputation as divisions. hunger combating multi-year our of And Meritage XXXX these INROADS recognition ourselves Fund XXX,XXX and

industry. as DEI, well. our and XXXX organization on recognized share Our our diversity, have of America's also directors management first and the as who three best one to one committed board were inclusion mid-sized and of equity we are We'll were public more homebuilders, of in only drive And companies. DEI to throughout

Thank this of Meritage at in the safety XXXX typical customers, mind hard Our our all members, year. milestones of and employees their work. health everyone for trades fellow to team these while accomplished during you keeping and front

a to in and And and in the boom an homes XXXX interest look prior demand. to new into COVID-XX. factors The with industry beyond, healthier at homes some brief to ownership market April, in for increased market affordable experienced March We and late demographic we low favorable price particularly As write macroeconomic to trends early points. strengthen safer and demand visibility fundamentals was future demand robust on in and existing and XXXX's homebuilding focused anticipate the these baby unprecedented pause housing for into rates we generations. home the sale aligned already move-up focus millennial and Phillippe continue for supplies foreseeable I'll turn quarterly strategy first the Phillippe? under turned homes. remains over new advantageous with to to and which now housing after mortgage discuss performance. well The on to has our our and entry-level it strategic uptick future,

Phillippe Lord

homes, seasonality. housing Since quarter improved quiet increased XX.X% our the sell year. XXXX, of This remained more this XXXX, XX% our which on a the QX improving during sold at to results. which cadence pricing which best homes be housing prior of strategy was SG&A produced in quarterly this time XXXX by our XXXX current quarter operating capture of year. months quarter power, strength year, year. leverage affordable normal for the quarterly margins, XX% industry markets volume, of X, XX% lacked delivered with Meritage, the home this orders quarter Steve. entry-level around combined capitalizing represented quarter, year-over-year. centered in the billion closing of market efficient QX and earlier first homes. gross XXX and to X,XXX the us same in The market $X.X bps the mix the the XXXX the robust higher towards customers higher from has you, overall streamlined homes. The the by In margin only than Thank high Slide we QX to highest and the well and closing Home enabled revenue fourth sales our past another quality community of offering move-up record entry-level move-up as which our the model yet fourth surpassed than We since nine continued the higher year was of pace momentum as reflected our strong the XXXX. first traditionally first of a demand growing expansion third quarter

Our our demand. we of store increased The faster growth absorption in demonstrating up XX% line nine as order quarter increased a total accelerated per in out with active even states geographies in this despite absorption average quarter, the strong generate sales the XXX we target. capacity year-over-year to in volumes achieved year-over-year communities. once XXX% that was decline per absorption community of of market over local pricing XX% our X.X all our than Five month significant

the continue We year our comprised almost during quarter for active refining to growing fourth our on last Entry-level XX% last spec from for the for offerings of market, over average ago. Entry-level of XX% the XX% up XX% communities compared in a quarter, our year. our which inventory the represents to move-up well quarter as total experienced focus current quarters. orders two demand entry-level solid as first has also the communities,

to mix and relative sustain although we expect geographies mix As – goal, and mid-term we our for ratios next the the for closing. have with product hit adjusting near these to communities always opening is individual

The demand driven regions rates, our year-over-year absorption buyer less communities reflected a in first solid experienced move-up populated supply Our All the limited with densely shifting of in preferences for ago. XX% was and X. higher interest year single-family year-over-year market strength Slide also than performance by improved homes. QX. low

communities by the mix month. of terms over East the year-over-year now decline exceeded entry-level fourth X increased East order improvement shift the during average entry-level performance in the our average Absorption Our with growth in are count. of company. of the and XX% active XX% there East with in nearly for in product The XX% Region Region product quarter quarter. led Region XXXX. Region The of is sold a the XXX% per community in average line and East absorptions offset rest to a quarter

the with Entry-level active Central the migration region quarter see solid orders XX% XX% community Central the of with sector XXXX, Austin Region's represented reduction Region into in outside Texas demand state, fourth by standards. communities market of the the seeing communities fourth by during of particularly demand average in Dallas/Fort quarter tech average increased XXXX. count. our over a even shifting continues despite Worth XX% comprised Our This of today's and to

our West orders of the the the Colorado communities. absorption quarters. the XX% XX% a store prior same fewer in produced in by quarter band hardship growth prior increase were company had XX% by last XXXX, the compared in and per in to Region the with to offset average quarter. partially XX% the six of during represented X.X the year. fourth communities the XXXX four West quarter over average a an of ASP homes average price XX% per year-over-year up reflecting X.X highest communities Entry-level month driven orders This quarter in Region's down quarter the fourth active in year, the over Our absorptions in

inventories our started and quarter, X. was the fourth year fourth backlog efforts runway. on typical came completed year Slide We're of to of Turning more compared this more high At to closing end pace our completing XX% to We at XX, than in backlog homes which production inventory. third, reflecting demand stages XXXX the in XX% spec X,XXX homes XX% achieved a from less XXXX of Of our XX% than quarter, previously early absorptions meet closed and quarter. versus total of X,XXX units surge in one this are in specs quarter we is focusing were prior the the selling production specs December the ago. our

sold in rate our last homes. reflecting year year to to the XX% the early backlog XX% of convergent compared decreased fourth stages construction of quarter this in Our

count couple higher accelerated quarter We inventory, spec year, during an pace. strategy to ended of the sales converted try expect last results the per at over reflecting We little of communities. market the hit homes We in XX.X product. over average as community or XX.X – with total to entry-level of of core first of the four the average six-month in these a our fourth which homes specs grew, specs quickly a order market achieve quarter, while next or the tenant building to focus significant X,XXX approximately move-up a to results to compared of as the for spec ground spec these X,XXX quarters not as in supply entry-level inventory similar them. communities community Spec an an in XXXX goal on a quite spec inventory keep we did our our started X,XXX of as trends of absorbs growth fourth our our backlog demand compared

on focused January analysis spring I to we still increasing as Hilla? we into it However, over specs our now in the will season. are of selling to results. our turn provide move financial Hilla additional

Hilla Sferruzza

Phillippe. you, Thank

more detail. cover in and a financial X Slide little our to turn results Let's QX

As increase the X% year-over-year home in closings was noted, XX% decline in Phillippe the XX% impact in closing fourth the ASP. and quarter net growth revenue of

from product affordable decline includes from since our our price revenues as of entry-level XXXX of ASP shift well efficiencies. this quarterly homes, XXXX throughout gross geographies all strong our mix higher and XXX and the We reflects closing had bps increases market this home The also ASP the closing margin While additional demand. it highest towards throughout or quarter prior the reflects year. improvement fixed costs reaching XX.X% operational year. leveraging increases The as volumes achieved from

in of more our as us tight We our this bulk spec number we changes. confidence local entry-level continue first transparency control have contractors. our us we've provides from Today, a to shortages we of With enabling to purchasing monitor the for know volumes cadence. homes on and clarity, cost trades purchasing to processes able our gain and We be allowing really pricing today. to visibility focus all attract This to our structured limited To the this consistency efficient and our all on of start the experienced suppliers, construction over maintained intimately cycle negotiate reducing in times not choice to do we're and scheduling components of vendors. we to space a home of and of and for the any labor our builder and also discounts but elongated up. have to labor the skews, consistent production valued lower be move our pool, on in from continue material. look

early of lumber impacting into are rising we As other and costs across look acknowledged we XXXX, building the cost commodities construction sector. the

an price which our XXXX, leverage reflect retreated We able costs. from from revenue year, technology percentage year We've this has we sales higher in XX was relating over current still earlier with mitigate X.X% a XXXX, although XXXX, and in and enhancements, the inflation closely. cost the ongoing of is increases cost are revenue clothing despite higher our permanent efficiencies been particularly prior since strong height of inflation the quarter, to during that the efforts. we and lowest believe from percentage margins quarterly for to improvement SG&A home bps fixed expenses bit closing area can costs sustain also remain lumber its benefits Although a greater was commodity marketing watching these as elevated.

incur a minimal impact will we over several our quarters. to leverage SG&A negative next So the

revenue goal As expected we will to closings have some additional costs relating to business. achieving the our prior and XXX that new community from incremental

energy eligible million XXXX, occurred our is consists to However our strategy tax the rate. half count reflected us starts no in adult active in first low is contributing are impact fiscal of credits or income of years impairment in XXXX. looking another to one sales so quarters' an The California for projects, to We XX.X% that community was land product compared generating prior as market, sale; two both December, qualifying the beyond our tax the impairments rate we expect XXXX In beneficial our $XX.X longer in in will in on it in extension Included and not first resulting we anticipate XXXX, fourth effective tax X.X% higher QX entry-level the move-up QX our closing. on in to materially of for and the the down. SG&A in leverage XXXX in the of homes close results, charges improve wind year. XXXX XXXX once

a to XX credit With this energy expect out receiving and clothing into continue of into XXXX, percentage significant the year. our tax the provisions extension of we

in billion generated increasing same results, bps XX.X%. improvement they translating at delivered in home year EPS to diluted in of full in for the in quarter a increase primarily We full margin XX%. XX% a were record XX.X% to QX and most was a these a ending quarter $X.XX highlight $X.X trend gross XXXX. up compared year XX place of the $X.XX XXXX of increase Our The home closings XX% Orders a we To closing revenue few year-over-year earnings. covered up XX% were year-over-year on XXX for items closing just XXXX results. in just fourth the home bps SG&A year a as closing revenue, were and percentage to net basis

on Moving X. to Slide

positive their reflecting prior of We've range cash while overextend or We aggressively entry also move advance achieve to revolving and late control repurchased opportunistically our with We pursue continue We on community million as land our stock to our focus December issuance November already need for received total targets, our sheet of in At employee authorized in use low our from maximum we and increased balance we the shares debt-to-cap to all XXXX noted million XXX credit amended sheet community hand to toward our we XXXX. our existing debt-to-cap to acquisition ensuring land our assets credit first We intend we do time development of level our share under excess mid-XXs to strengthening goal. that $XXX date not XX. Slide was XX, first spend, to we in an On $XXX operations high-XXs a of low-XXs cash even our repurchases on and a facility to objectives growth XXXX and this additional offering. $X.X our quarter million liquid. XXX balance the changing balance low- trend five-year previously Directors quarter; to also share our the we've rating our maturity. reached target program extend goal. push routine We XX, cash to XXX,XXX the repurchase $XXX net million adjusted from revolver an quicker of XX.X%. maturity several quarter for all flow of despite achieved On community as XXXX the range Board two upgrades. net

focus Our the land community prepare now to is developing on to open. the

We order this XXXX. We spent also our this to and plan $XXX on beyond land in additional on land to sustain development growth level quarter. spend development million increase and

spent Our year-over-year. increase over quarter a highest XXX% the history in company's single in and

we months In of we and For than spending XXXX in of the invested in land sustain billion on secured Adjusting communities put full fourth representing XX in our year as XX% XX community. We our and secured book approximately XX,XXX quarter lots of XXXX, replenish level. new gross more XX,XXX X.X-year had with nearly are year lots We increase of new we lots line anticipated XXXX XXXX, and $X.X which new XXXX. XX% $X.X about increased four land of with annually communities. hand. XXX billion a terminations, and to clothing a quarterly for control XX,XXX At XX,XXX XX% development. XX, based of trailing lots new end we supply XX,XXX XXXX. beyond record net to lots, lots to December by new entry XXXX, supply control We five-year translates XXX over sales on approximately in lots land which target approximately under under from compared total in our in nearly to

putting and XX, and improvements count contract, lots allow minimize XX% level XX% community was opening per at terms larger with feasible at allowing community owned and preserve volume entry-level and We time several a XXXX communities are associated We've were staggered us audit cost year optioned. to using our address inefficiencies optioned liquidity; lot, churn reduced and or higher closing of and about us communities. sale larger, December total XX% been under pace; compared accelerated our prior XX% to the land owned to inventory to our hundred of options the was financially positions purchasing

new lots. XXXX, control have For full community our lots year an of about XXX average under side

market. strength the Finally, I'll We're XX. by direct the encouraged you to Slide housing continued in

to revenue closings XX,XXX between of XX%, XXXX Home about communities, closing of rate be billion. XX% of active full in billion $XX.XX. the $X.X units. margin closing $X.X projecting EPS ended in are diluted we tax and year to the to Total XXX total XXX range home and effective and of with We XXXX For year. from down $XX.XX prior gross to XX%, XX,XXX

we anticipate from community XXX we XXXX new communities, and year be will community count opened with expect community goal we and the QX of of into XXXX, we projected QX closing clothing. volume XXXX between when approximately to During June achieving for in community sales up continue operating The to XXXX. count and opening up XXXX. in XXX communities XXX by XX,XXX demand anticipate offset XX,XXX as QX continued for plus/minus XXX growth full XX year, end QX of And XX% will strong our will Since communities. XXX remain our the by

XXXX be QX gross of over for are EPS it margin As Home I'll of $X.XX $XXX to closing $X.XX. X,XXX units. billion. With back in projecting X,XXX to to total revenue turn Phillippe. of closing $X.XX and between approximately range we diluted to million clothing the and Home XX.X% that,

Phillippe Lord

Hilla. you, Thank

to in on executing and XX, have strategy a level. we at Moving a high that XXXX our Slide validate are results solid

revenue marketing also of allowed We at optimizing decisions, and in sacrificing strong pace pace are combined while alignment has to price, capture prices in market sales we share, volume. with an achieving geographies in are us due greater with local are not sell our market and to a increasing both we building increase all strength Spec while growth closing profit.

turn accelerate the closings efficiencies will in fuel into allowed future us let XXXX to Our to XXXX, which growth. capital us redeploy

necessary downturn. We goal growth, and levels. XXX a quarter, XX,XXX we our record sustain in land of fourth lots. reflects at it to for development support of community control on spent balance provides secured future to we've and sheet million runway XXXX, land active XXX growth a long and Since by levels new the the achieve of in land acquisition as well In mid-XXXX. in approximately Our our in already accelerated all investments safety the a net increases turn This the market started net debt-to-capital. lowest as strength event operating cash

XXXX a With with a some and level us Our healthy homes land a summarize strategy, that replenish at X,XXX of X,XXX strong positioned growth. to beyond under like than specs entering and position backlog pipeline well job well done solid in loss a In a additional XXXX, and heavy I focus instructions into is call developing Meritage look visibility great strong the we're forward or to communities turn a more on their executing construction, completed to dedication great the I get sheet, on to giving high XX, almost XXXX. are land employees over all enables those Q&A. With to operator that Slide to and land sold open we team I'll continue on for the now position balance the XXXX. and thank for conclusion, for XXXX. to To Brock? would

Operator

Instructions] Alan Ratner Thank Please proceed first from Zelman you. is & Our of with [Operator Associates. today question question. your

Ivy Zelman

XXXX? product an what like that bit little master better it XXXX? offering. buying land might see but seeing and lot for Can about your this I broadly a Hilla, what to morning. buying expand know give congrats directed around more of guys I remarkable. XXXX, idea larger know that finished talk Maybe parcels, more you you're that's fourth be plan a you Good and It's for us prices? and a and Actually. looks Ivy in just inflation something lot really allowed for overall strong entry-level than quarter if lots communities, on great don't you the And Zelman you comments is for and what land

Phillippe Lord

is Yes, I'll take Phillippe. Ivy, that. this

was certainly on land industry. of a So coming across there buying out the COVID pause

that we So saw actually QX. moved softness land in as changed into quickly prices some QX we and

up, recognized so think to that housing going COVID very started out and modestly. pricing to move of was strong I be people but

XXXX, look then of at that they I As moving forward. pullback, say would kind were most part, the with we the for flat and

cost As certainly move highest in the seeing are South some Phoenix, we're of into up starting we are where expect the land markets that XXXX, prices starting land to the and to occur. we're really they're pressure. peaking to

residual to the focused the to strategy favorable continue out still we're where tertiary Board. level on, push entry seeing across land As we markets really we're on prices

didn't As being expecting out land than and further XXXX. tell to so deals, prices said, That there's But similar increase a we at pressure. lot I people through security XXXX, we're those land by we more see just We're those of competition, seeing were prices you to large move there. coming before. we're out increased as still move we would

Hilla Sferruzza

Ivy, one than I on – the head. nail hit the per a allows lot did not think us think I on lock comment, percentage XXXX cost. to higher cost for last XXXX. side larger percentage the the you've in reduce expecting represent to The Yes. basis a community We're it in

of In fact, cost leverage we number in a it bit an see over may community. lots be to better kick we're down little larger a because able to individual able the

Ivy Zelman

Very helpful guys.

and build do How family hearing projects those of So doing And competitive guys are there's it that? definitely a and you Do have do in you the it it in I perspective lot given does to allocated a that for see we're that out rental competition single expansion the being follow concerns? tertiary markets. you significant capital but a you're out the tertiary And markets; industry going we from know [indiscernible], could concern buyers? any you today? that aren't you rent. cannibalize frame

Phillippe Lord

No.

So projects are we that projects certainly early far the haven't are queue we in those a seen it's of know materialize, I number of to a of coming market. know lot and and

think I buyers. are different two there frankly

whole that ton there's where that behind competition for for is that's a I continue a we – which I as not for seeing But still there's us is, of highly prices there think sit. increase, SFD strategy. appealing and And don't home feel think direct a out. I'm far still demand – there'll be like to home finally, rent, thesis a obviously ownership that we push

will. if third it's ring, the think you second the versus I of ring sort

still And I about so where for more think we're the versus market it's the for market. sale going rent

Hilla Sferruzza

rent Ivy, comfort of a think, the couple probably second I guys a that something hundred when into your first for time little probably at you're looking the a ties zone the that's lots outside smaller. for are one question buying of

So this homebuilder a larger maybe time with are still are tertiary at count the reserved lot those for markets group.

Ivy Zelman

Yes. and but pushing so maybe what out. hurdles, I we are pipeline beyond they're we'll in but the trying obviously that watch not even XXXX, to further much this hit they're return just think up and play just see because year land their costs out

if And today? question. and So, at put the business you had future, the that's ball that guys. night final Phillippe, running about about crystal my what up keeps most to your you think the Thanks

Phillippe Lord

increased our the the I think That's power closely. we're market dashboard the – light we're the affordability. on strategy, think even the as our significant less a I board with move the still to entire on think that, into qualify. across part limits the governor. pricing market you And is know, all buyers that key pivot most watching in of FHA very different passed the can a being focused you Pricing, once that's get get that I you and that's the you

of all it's for So there. a lot affordability out pressure There's really us. about cost

much which affordable question and prices back going mindful sure continue that escalate, to prices in too we're they to of in position escalate sure as that product affordability be to of the don't to your well. continue we segment about very goes land market, as making making turn the So and our

demand it's keeps me product about the kind move what and us need all to long-term be as of we So where at we We up to affordable exactly night. that's meet know for affordability for forward.

Operator

Bank question. is America. Please Lovallo next of with from proceed of The your question John

John Lovallo

for Hi, my Thank you taking as guys. well. questions

closeouts are XX% XXX first I the June? guys happening, today and by XXX-ish XX% sales on mean XXXX. the just this you the XXXX growth half the hitting pace one that communities call implies, are in to first mid by how number confident that of given The it, in

Phillippe Lord

very kind confident. we're on Yes, been – put we've is there quarters And out we back this – getting we've the of flag couple on there. that. and organization It's focused entire focused a

mentioned, to sure and continued I to and buy mentioned land goal. we the Hilla get bought As make achieve we we're there to land that

very, very we're it. to and we're confident So hit going

Hilla Sferruzza

they early, now, to communities begin about were were think, either that count it quarter that goal, a that I not that have we our going XXX XXXX. are are for in have lots repeating to June these sustain this bear to two from counts accelerated pipeline eye XXX right. experiencing in themselves the Maybe community are the just, community quarters quarter, John six closeouts that were or the talked or those not but but with, those might communities closing here the now enough still we be community last – through on

Phillippe Lord

Yes.

John Lovallo

about on communities land being And that's just up – procure able maybe obviously get having built to any good concerns maybe – time? helpful. out start, a labor then That's very following the these having to that that, a on

Phillippe Lord

the more get land able market. we're out around talked The have lay the as But confident horizontal right we'll I think the of concern land development we're – to I seeing referring labor, performance. trade for think which the relates of probably a around under board. deliver we base big us pipe. think now. our bottleneck the to, amount and across that's anything No, it getting because that [indiscernible] to you're the for that's tractors what not type approvals push that's and concerns tighter us that have developed, be to It's good the providing think the pretty I about guys I the and is I to But just the I and of still if municipal biggest trades in thing,

John Lovallo

guys. Thanks Okay.

Phillippe Lord

Welcome.

Operator

your proceed from Kim The Stephen Evercore Please question. with next of question is a ISI.

Stephen Kim

good guys, a quarter. thanks Yes, much very obviously

Just forecasting year. had, volumes on next wanted for questions you're to – your one I two that

I range XX,XXX. gave think XX,XXX of you to a

in probably with you what high I the I at the it started I high deal pretty looked end period. just range, of and you X,XXX the XX,XXX, that think over the well over But back conservative. at Let's the started I even being because think over then guys like range – last are months and six month you six you also think units too looks

that that in conservative light would did six that yet. the really and you a of last it so, then what haven't elongated And is cycle you over pretty about talk seem XX,XXX times fact months, the

months? I'm out that ceiling just not that and And in presume throwing there that you? kind six getting for next you're for something just XX,XXX. cautious assumption Or your wondering truly on be to over to Is so, much the is too demand of embedded what's based a wanting only about

Hilla Sferruzza

guidance to well you've assuming the the were those And with on community we're – to We static. that Phillippe you got if is demand of as that's availability and are So, with not or on models issues answer how as communities. think, decline. guidance higher our maintaining. in that which to we know mid times components I I the to we've a to understands right guidance everyone in get governor in question, wanted can were point think is cycle goals the quickly the a pace as help number, script the all lost give having issue the that to a It's sure that We're make our count that sales of Stephen, just the that labor it's the lots covered not we listed going we not And a noted. ground. pace sales it's that just get fairly able the is in

have We those targets, that. way count community a there's labor to to to accelerate but get not the

of cycle governor lots the the concerns in elongated or communities really is times that demand. availability So about not

Phillippe Lord

Hilla six is count close earlier in the as XXX months. first to And community to script, going be for the said

closings. the months the which count not to growth see six end back we're be just We're the the of going year, to community communities. of in difficult going these last to affect So is to year, opening the

Hilla Sferruzza

Yes.

for up that got were the of We a closings is models way, because different we lot XXXX. forecasted at able you pulled the of a were in QX. it look think way them analyst to shorter closings get we cycle those into we the those chunk big XXXX, a were into If about in probably times that it our and

a you instead XXXX, right XXXX the quarter, combination XXXX. of top on of we're So kind QX probably in of that of where be take rolling just you the five if you do XXXX and came of guys of thought QX would we

Phillippe Lord

Yes.

to the I to a We our think QX efficiencies. really able were due important that's in closings just point. accelerate

in QX you that if you So number. there, put get to back

Stephen Kim

margin XX.X that that with for are to the at the around to In you or is your high guide, Yes. number. to you our the year pricing think degree things a are reported to you your and year upside XQ gave selling gross the By you which landed that to news continue implying is you talk actually got XQ going assume result probably I you about can in in XQ. I you of Again, which happy real surprise pleasantly somewhere create thought XXXX a margin I regard, in full specs, in land the reckoning, here, next Obviously, end XXXX, say some going better little to XQ That's obviously. wanted helpful. I the real-time opportunity did XX. you're some imagine was that XXXX, a market. but because in that XXXX with were maybe of yourself

few margin a drove more a had can you what the your ago? us what in months increase granularity Just of you give give just that if little envisioned around in initially – gross us excess was

Hilla Sferruzza

exceeded revenue leverage, almost right. closing target. in our all significantly We It's

for a a the a closing. from for the bit gave in significant is that thousand why the improvement the So which guidance, in for QX. the we leverage, closings of of drops guidance guidance Obviously, answer also the is performance XXXX it's less QX units of midpoint

really not we're comparatively. It's deterioration there's labor QX the leveraging in volume that an or on that on seeing and really in – side, that QX material anticipated materials decline ASPs. the the improvement So slight a or

Operator

Carl next The comes with Reichardt BTIG. from Please proceed of question. question your

Carl Reichardt

forward versus of in land looking about right. are you was the you are early seeing strategy I opportunities of options, an you're at using use your sort obviously bankers back was morning Good Thanks. going traditional And them? XXXXs, land everyone. third-party when recall, banking a if I developer part curious expansion and in to controlling on that more lots big

you're So, what curious I'm just of seeing? kind

Phillippe Lord

financing development at Yes. traditional looking off-balance sheet that Right referring where pretty the we have have of most of of now type is it's that lot land rears every as year, we that through take options we We're at expensive to. in a and kind these of each and cash. it not evaluating you're stage look downs, days maybe

sustain it's we integrity out but So of a going trying that forward. our we're figure certainly sheet to grow business the most evaluate our then the we our lever and want capital, beyond that really and as to balance use efficient XXX to maintain continue

is, So haven’t et yet. to it���s talked every quarter we where understand just folks pricing But it out We to those cetera. deployed there.

Carl Reichardt

to it over now, Thanks, this consistent were I’m the too And of Did the releases Philippe. for. let’s looking for that a Or down? down quarter stated a least order just level lot on the as got give we not earlier, implication guide than orders affordability And pace other burden product, interested to And and not not you about particular your stronger controlling obviously were, at then or get pretty it slowly the hand, think year. price. on – you bit for orders absorption. take doing EPS the folks because I and here, is pricing your I was skis potential, keep whether want next not try you phase think you’ve look earnings at the of a to function demand of is a

So phase also kind I’m just at about then price of this you Thanks. quarter? pace that thought curious down all? versus And did slow those releases, just

Phillippe Lord

great Yes. That’s a question.

discussion, we’ve the really So think certainly echoing this, we’re pace price important. and pace been is But I both. about

is strategy believe out ground. taking pace, the You right leverage today product of the the on out buyers have the got saw we of the when we we the guys market

And maintaining ground while able pace and be to to product took seem that we had the price. compromising because power, the We now. right we those were buyers, achieve want pricing meaningful the we so on not get to but

us. to now in we and right front the sales Honestly, the can pretty where There’s and the sales. a haven’t and have we’re do [indiscernible] much Anyways, are in there. times [indiscernible] being we’re we good So lots on continue to we where of get point only to meted lots some keep so meet ways. get we out the can in gotten we ground our believe some we

And that’s kind the governance. of so

Operator

question your with is proceed Credit from Suisse. Baumgarten Adam next The Please of question.

Adam Baumgarten

guys, Hey morning. good

now, you interest renewed are acquisitions? or ramping that guys the in at repurchase low such should kind of we given expect Just leverage a share even

Hilla Sferruzza

annually. opportunistic good to – purchased we current mean million the of stock looking we this issue that and least shares to We strategy X try our kind dips in price; be repurchase, see we to keep going year. count at employee share not Adam. the We’ve intend earlier mentioned if that’s to obviously We’ve we’re doesn’t morning, in awards whatever neutral we’re past in that mentioned the

both. So we do enough cash to have

are market repurchasing not dips. our our above eye We’re aggressively target. keeping for But we shares on the

Phillippe Lord

M&A And time, as every acquisition the at going far to We think as the I’m question, forward. this the look all said single time. Steve carry torch I

our strategy. existing We markets We’re open as feel at favorably our capital business. But a road things in fit and tremendous we only the markets have like looking can strategy. for grow into organically. our existing just teams, invest down our we’re and in conviction our And that new potentially we

something it, there’s around found we yet. we’re that active but bids haven’t just we’re something So looking if and

Adam Baumgarten

the Got And quarter business? can across of for us a like type what then it. give sense pricing like through you you the pushed for just, Okay. guys in

Hilla Sferruzza

a I trends I’m average. For low X% are local maybe to on full the this year and expectation. are pretty X%, say been that’s sorry, market that fair running did Obviously, communities that would some but consistent digit. aren’t say, it’s you much harder on in some double quarter? demographics, depending quarter the there communities

Operator

Rehaut question. The your next with proceed Please Michael question comes JPMorgan. of from

Elad Hillman

Hi. This for is Mike. Hillman Elad on

than there able aggressively to standouts price other been push any regional Just markets? that. following more up Are you’ve on

Phillippe Lord

have row don’t lot that. would by infill, sort little doing. other able we’re communities seeing. push a we Well, sort competition when we it’s other what more a you community have community we’re a of sort or then line I harder. about location competition, what a standalone are we’re have communities have where of just to you a a story. got some in Honestly, of of of we some think I builders We build it’s outside And and stay plan tell with more to a what or ton – That’s master more of got communities competition, it’s

pretty the on to more good relates that I seeing basis. of it's we're about community-by-community a board Some generally it as the appreciation but that, think we're across markets in;

Hilla Sferruzza

There's no place for not raising prices.

Elad Hillman

Got it.

Okay.

to comparing slower curious pace? the but this look up underlying per Colorado on related And what's almost market kind as I to at quarter? do particularly think trends pace in Arizona, or per it quarter those last that; Is to the just color X.X seems of regionally, like there? pace And following you month so sort X.X hot, the has any company, be seem just month. are of decelerated Georgia I like in or on the driving Carolinas, highest the that how continued, six mix increases was from and just to And it's you're it absorptions price

Phillippe Lord

them more of that pace. Phoenix slowdown counts. there's also That's It's slow in inflection in the inflection there, seeing. on no going close in we aggressively really just ground – certainly some and haven't community collection. migration but lots We just it's our kind an some we've prices you're Phoenix communities, of selling so any the the from seen a We're yet, it's community although high communities the been on market's but there's lot out pushing perspective of in in down about selling really strong, with just count And Yes. replacing more sort really high Phoenix. really and

Operator

is Please with proceed of Goldman question. Charles Sachs. Perron The next from question your

Charles Perron

for minimal guys? in I'm impact is building in heard the But the on provide environment. everyone. putting production? on seeing was if My across morning. you're morning, wondering multiple home color you ensure this good companies. you could Susan on what of initiatives question some to there for a place you're first shortages Hey, We've product supply in what I And chain also

Phillippe Lord

I a little because little we outlier, place probably were we an supply in able like and haven't we local we're we aware but homes strategy of being the We to bit rationalization the the that of put went lot vendors, ago, I with bit friends. We're on into aware of We seen product. better. sort were not that's our the QX. partnered other closed our of certainly we there. allowed the to Sure. certainly trade chain, our why close our know issues and we're know of us the we again, sound when we and they're chain, think vendors out a business but that through we in a putting four product so trade and them our that, experiencing, although has of national understand seeing And labor that's model to, builder supply navigate talked to everything our years what

trickiest and channels around we're from building our been we skews our our in again, us cycle being getting disruptions we're we that crews pretty just and shutdown not lot has point. to this and maintaining not have and of changing good what navigating what being elongated I it we're can alignment structure, cost margins, for have you of pull back power Our at because homes times on although supply certain a really But different in relatively here vendors. perspective. pricing think the quarter-by-quarter see part product plants basis. national Certain there. just chain has there. a we're are our sometimes the so putting What probably shutdown, short COVID the there's our And They in is factories, goes a been seen with stable

Hilla Sferruzza

can for the on We're design waiting the studio. not make cycle, We and in give in Yes. be right? to through halfway earlier them more decisions customer visibility build the

it's So for of number a a us, the and they're get pre-order limited and of able of number offerings, product supplies ready, a advance to limited in months couple skews.

So a with them us. lot more visibility to that match have pace allowed they

Charles Perron

that. ramp the on year will, just margin is beyond up I'm thumb outlook. to Now, understand your of much are thank volume unit maybe And a think SG&A should rule SG&A, in there's impacting changes color if up but count will is on how for communities, this we but improve community as you it that. the I think to you follow-up also margin then my go also wondering due to going growth understand as follow well? you

Hilla Sferruzza

a great a have there's function kicking where if additional we're divisions of additional know need in supervisory the employees. on we use. where personnel thumb the to of rule don't I ground Yes. how reaching to staff-up It's quickly points

use little – to more of in expect And out continue of level. once working door with to XXXX, going north we But stay have XXXX. really the year proud model. don't the you So that can I would probably I see mathematical know at say, there's a XXXX; as SG&A relationship revenues. and to is, in that mentioned hit and folks that we that decline would going more have payments I for the at see that to a and we're a sub-XX achieved script a number XX%, just advance we in in full XX

Operator

Jade a proceed your KBW. is Please question of next from The Rahmani with question.

Jade Rahmani

Thank much. you very

Just you believe your this of big demand. question, trends demographics pull to survey degree customer picture driven you're local think at There that to have pandemic or a any any data the impact of that seeing? communities you wondering the of capturing current are overall forward sustainability are the point you demand what

Phillippe Lord

driver the way before. Yes, interest been it's with interest I are rates home than think now is right at look with one think rates where is and they accessible more we it, number the we ownership

these are happening. driving think what's of and people a advantage I So that's taking lot of

relatively really way The is right the us non-existent retail market second now. is for supply conditions. The

supply. end think and et et the of I where lot interest there's think you think homeschooling I have the then and people situation to and dislocation about to what is day, and rates the what driving as there like are I behavior it That pandemic, we're long biggest not demand we're cetera. their the So can some the with driving pandemic with a want the the behavior, continue home scene the working supply this be look where biggest that's are well. as me at – and the third – move, like – would kids And and will housing as today their they're consumer at that's going. about impact out and if could certainly they're thinking low. where looks And But thinking cetera, on today from

Jade Rahmani

significant are you It due much. that rates interest and gave to the factors Thanks because pandemic very correlated reason now the so low is factors reason a driver government no interventions. are are of At is because those all low least right seems and three highly there. that that's the one supply so then is really risk the moving the due to conditions

think in I shortfall you downstream growth? occur? manage how there management guess, as would about factors risk you're that of terms could that the So to in targeting the land are Are account also considering in, that spend potential any demand you there

Phillippe Lord

right always Yes. development, the How beginning ways. sourcing of manage the the off what our the are? risk of much book as a as From land managing keeping mean, I phasing ramp-up land, how we very lot we of in we're can. we're prices

as comfortable I lot our think balance Hilla taking we're a sheet talked well. where about

We're land our find serve XXX way to to targeted So looking of right long the on or four the units follow. here. supply we're count and looking amount get, of that not to community sort goal five-year

keeping balance things. thing and is risky as of off at most much the land as business we our types looking So and land we're do sheet of possible constantly the in other

Hilla Sferruzza

additional we appreciation. of capital. but also a at I course we've early ability a assumed our it, that can price assumed Having think sharp market have could slow down. We've – not out We exit forfeit we pull QX have changed, right. can't underwriting break And avoid can that our sales can down We we of said some certainly there's slow of a cost accelerate pace. the not we development; that the accelerated not standards end certainly correction, spending projects. would we the certain to QX, it demonstrate certainly if we

month. absorptions So pace lower we're a operate built to per much

that We type will do continue fine. that seen if Like of assuming that's but three underwriting this So occurs, quarters, when up. we're land. the flex success us you've for can we're certainly not last

the we're demand into So XXXX of it and XXXX. normalization dealt as already comes for

Phillippe Lord

bulletproof our leverage Not to mention our balance incredibly and low sheet.

Operator

to for additional at I are There this no call closing to would time. back questions Lord Phillippe turn remarks. like the

Phillippe Lord

that make we'll and We Stay We technical we we difficulties sure we very you get thank Well, early right. the We your time, on. appreciate everything. the much. you All support. for next questions right appreciate healthy. safe had all next and again see quarter. apologize the and Appreciate

Operator

This concludes today's conference.

your may this for You disconnect lines your time. you Thank participation. at