Toll Brothers (TOL) 26 Aug 202020 Q3 Earnings call transcript

Good day and welcome to the Toll Brothers Third Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to Douglas Yearley, Chairman and Chief Executive Officer. Please go ahead.

Cole. you, Thank you thank us. Welcome for and joining hope well. and families your staying are collogues and I you today Marty Relations; me VP VP Marketing With are and and of Cooper, Officer; Officer; Finance Senior Treasurer. Fred and Ziegler, Investor Gregg Wendy Chief Connor, Marlett, Senior Chief Financial

world the information website. this Before begin, about I on that statements on factors forward-looking caution are housing you earnings the significantly forward-looking, release assumptions and the control events, statement to you investorrelation@tollbrothers.com. listeners I our financial read and call based ask on I and current on to economy, pandemic could questions Those long-term markets, COVID-XX the on our who and many impact email have affect that beyond of future results. many can other our

begin. Now, let’s

with ended Marty We the on it the sales the performance our I XXst. are will over in very address turn July then focus third pleased to environment and current numbers. to quarter

X,XXX billion highest third net in in one the signed ago, Our units XX% units and year both dollars compared and XX% were homes contracts quarter third and in up to quarter of dollars. $X.X ever

community per highest quarter third XX quarter in at third X.X years. were the in contracts Our

It May's cadence, hasn't As XXXX. for July. XX%, XX% up June's had were and to were a monthly an comp July's one ago. just contracts not Demand than was stronger down year XX%, easier versus up were in June

that by trending market and The precede same has sell indicator April, June with months historically Toll our far contracts significantly including current in better about selling an highest of July binding highest the weeks. for even so history, the to you we Brothers history and most conditions demand August. last also contracts any when February, with June our deposits continued for generally a March, as of the up We reservation nonbinding are three fact, into July remind in In with deposits August three a our weeks strong contracts compared than month homes. they our spring

demand, of With keep continues, most in in we communities the quarter. strength this we this prices strength expect to raising If increased prices. our

an to for all traffic believe ever. agreement are of tremendous year low traffic positives the communities, many have or summer are the who that by whether visited are Historically, far ratio conversion were X.X% to importantly, and demand XX.X% highest builds homes at specific to ratio our our affordability. our interest surged there rates Our on but Customers undeniable very are online luxury intent or model. to rates our industry, market. benefit below for fueling buyers in XX% of some We buying. deposit ratios order reasons why our were mortgage business XX across person of entire segments

X% a rate, home with monthly can versus mortgage same home example, versus X% payment. an $XXX,XXX a with For person $XXX,XXX afford a the

Now sanctuary ever, more in a work as most our a place customers family the world, place the remotely. to and their home for view important their than

only will and by home home And site, home their at want to selecting look home the growing, Additionally, many architectural of their home and homes. ever want than and importance buyers personalize a design, more their new options with the new they finishes.

Our meet model to build-to-order ideally is trends. growing these suited

that elements options, their add structural ability the our can lifestyle. are for best to suited buyers With choose those

options kids home for such at parents Open still work desirable or lifestyles. high-tech include other homes can adult indoor home. multigenerational private, today's design family multiple offices, as suites Our floor many living members plans in and with outdoor features efficiently for living where intelligent

inventory, the to months versus X.X or pushing housing means feel supply X.X more XX% of are of demands that the limited who into a them we have on homes. a their buyers the our added our months, confident to dynamics fueling homes. at average this buyers resale inventory ability With Favorable base XX home existing incremental quarter, transact. single-family portion $XXX,XXX demand and also This upgrades market also to new demand, home price Limited capture well-positioned are tight in year of sell to inventory supply. average their resale a driven by with

from of in rate to Our and be Their The primary believe, holding for educated job general. lower is prospects gives will well, home. home confidence college new a this that college to professionals buy demographic, graduates continue unemployment them the customer more, population we long-term. working is appear up which much than

have strong In addition, to likely more are from the accumulated wealth they stock market.

demand typical see of afford are starter their millennial combined Millennials, wealth families, home and bigger to a have XX of thirties driving years buying savings, higher They to is them homes. and home. priced are Another factor the in forming generated which a demographics. work whom first many we can from is now than enable that XX

with of an more about buyers first-time XX% We involve our our homes, increasing these luxury are capturing of share a sales affordable buyer.

boomers retirement, On many of plan phenomenon that is to as the baby new nesting for end their our has business downsizing side, improved. flip in accelerate causing also this anticipation of

across markets, Las is significant to Phoenix, We job they working, Florida, of are remote required. live and for Reno, office more than where Boise, still for seen course, and our benefiting people price traffic demand which while demand friends, continued their people in chase value the rather Austin, to In a and points, are of shift historically suburban supply to homes. we favorable of previously low We've the living, 'XX, reputation and been as With Lake our forward variety our where long-term desirable communities a in of rates, in driving Denver, geographic geographic near their from look our many relocation and home, want in trends. view long-term Metro way we beyond. 'XX sun. choosing increase family now footprint, we to City, fiscal fueled Vegas, In the demographic Salt remaining the growth imbalance, a well-positioned believe, the our in of we believe positive suburbs a diversified service, has increase broad are in major landholdings mortgage model customization coastal order advantage spacious market, build summary, and to and a resurgent also to housing With wide our use and a attractive people these take our cities. for desire offering homes by and quality, paradigm

turn Now over to Marty. let me it

from Doug. which in in X.X% were year year fiscal delivered $X.XX we billion, Thanks, revenues units, quarter, one of ago. third In up down XXXX's X.X% dollars generated homes and X,XXX and

$XXX.X diluted share per a to was million income net or year million $XXX.X share quarter one per $X.XX Third diluted ago. compared $X and

up billion $X.XX dollars. Our third of backlog X% end in X% homes, and units X,XXX in quarter and was

improvement third We adjusted XXXX sequential Our attribute fiscal the teams the of and second the XX.X% the gross our product margin of quarter in revenues was quarter. by solid deliveries in mix XX% homebuilding to to field. compared execution

home delivered in in the was average the $XXX,XXX price prior $XXX,XXX Our to compared quarter per period.

growth and expansion markets, more more During homes the delivered priced quarter, luxury strategic affordable in which into high markets. reflects our we attractive homes lower

of market build-to-order, Additionally, spec some were business them XX% quick our also that homes. we homes, QX primarily while approximately model start as deliveries delivery and our quick delivery is homes

this the expect the quarter increases we the X.X% percentage As in quarter. third and help Doug market. reduce price of was will and year strong pressures communities prices took building we prices, the most reduce on and year offset one continue, we last raising Should due we SG&A quarter headcount the compared increase housing from demand was cost the quarter as to lumber keep driven costs these revenues we lower home cost primarily marketing rising a mentioned, in SG&A our spend, by during actions and to benefit current this labor expected to as in XX.X% quarter. of other to started to ago. strong

last strategically As and delayed selling settle. of we several apartment our other allow conditions completed communities quarter, to we to market assets discussed

third to a significant to the sell during other We land of and half until don't any venture, $X expect assets income sales XXXX. result, million was go joint market the fiscal As to the first quarter.

Our balance strong. sheet remains

revolving all third our of our not borrowings million including available During and mature billion our $X.X XXXX. does liquidity until of we billion that November facility, bank $XXX ended cash We were $X.XX $X.XX lines. fully the with under repaid which billion credit credit quarter, quarter outstanding under revolving

In significant fact, no debt we have maturities XXXX. until

During capital points. $XXX debt the by million XXX quarter, increased basis liquidity and we net our ratio our re-used by to

X,XXX quarter and home new fourth between average of an X,XXX deliveries between are $XXX,XXX price homes forward, of with and Looking $XXX,XXX. we projecting

was less June QX just a fact mature guidance our in that Our reflects sold of a than delivery is July. and third backlog it bit usual because approximately the

our SG&A in a sales to margin X.X%. XX.X% in of homebuilding be to and revenues homebuilding X%. adjusted expected income We revenues the approximately as sale of gross expect land X quarter home tax fourth interest project to unconsolidated profit Fourth We quarter be approximately be quarter fourth fourth cost percentage be quarter other of We is rate XX%. approximately entities to million. from project gross sales and approximately of approximately income,

million full year. share share Our weighted approximately for average be count with the fourth is average a expected weighted XXX.X quarter diluted XXX to of count million

turn Doug. Now let me it to back

Marty. you, Thank

key return this laser of are is strategy. improving our our We on on element A buying equity. focused land

to ways owned and to ventures option advantage ratio land last at owned taking to optioned increasingly option quarter end. joint option XX% at lands. are We XX% We of owned and other our XX% versus land XX% quarter end improved banking, and

position land owned communities, XX,XXX which quarter, and acquisitions as XX,XXX or This approximately and we also spending higher are our price, put start at loss of We selective focusing land pandemic. optioned partly to also new total new lots, investing of we land ROI. million. to on X,XXX and lower and generate the the on already is the a land our development. remain solid improved, well In by volume existing lots reduce limited the as owned on $XX land hold higher spent third controlled acquisitions to our which we're due we With

on communities. land and margin than or openings our XXXX land rigorous This from our into of a decisions walk March of did intentional due This deals. the XXX meet early in built count during our we've slowdown mid-May quarter, sell is is the impairments to for importantly, away higher new and for not sell new the fiscal both communities existing reflected the during associated investment faster that and community to budgets a expected days More project out of new were more thresholds. through with underwriting approximately uncertain of underwriting year-end in all project thresholds gross which We pandemic. return

least will currently expect of XX% by on the control, Based XXXX us. growth year fiscal we to a believe at we we count be grow land, community for or of end significant XXXX. the However, by fiscal year own

Before Brothers we it for want I thank I up entire the to produced the this questions, results open for Toll team quarter.

We driving to a to with commitment result be performance are and in this to even direct every We service. is in quarter culture of of spirit quality competitive highest great that ingrained reputation culture. striving standards. all is day to up tremendous our cornerstone our is our wake value higher attest performance our the our a the providing of heart our The brand. best, the customers to and the This this

Now, Cole, let it up questions. open me for

today question Please answer with and Our will Instructions] go Ratner come session. first ahead. from begin Associates. question Alan the We & [Operator Zelman now will

question, is about it the very the on a Doug great. just throw thinking pandemic, volume not here, I sounds early of development of guide seeing days from strategy lingering the of of kind the which big for you're count is first and like a Marty, encouraging, ton 'XX just delays guess side the community I'll focused kind

bit you as of assuming in kind the absorption you've are communities there So would to got it's up here, whether let of I point it chain whether that reasonable of hotter the supply just willing it's able the you pace guess labor, to or perhaps stay little think large you're against the than -- supply bumping or system just months we might expect run given is little kind up? next something in strong, catch to to flat-line and XX what that a kind traditionally demand of does have coming have, the about where volume, constraints system, the that you think is bit a so, online, paces absorption a the be perhaps

the have we Yes, question. great described. a just It's as I land,

for well of we us, openings Every year, has XXX I across Next they north know open will come country. projected region answer the expect it XXXX. spread XX the pretty new and communities, to are new up, question at now, I that will in so least

the And they're year. across also consistent reasonably

Correct.

front-end. or loaded Back-end

correct. Right. That is Marty. Thanks

we build It sales those is community, think and on pace they very to take opportunities land our the of is question, and backlogs track, you that excited our certain your this issues, complexity and always experiencing, and in extend because right land it continues, homes labor industry monitoring XXXX. in ability price issues, see but And long and and to because to do of delivery raise we price, are demand the will, aggressively we base us something are will, become in will closely to locations, the on the sure are grow as we on It to, so, job exact good balance local. is now, timeframes yes, price that with a as continue by it our -- which back about of pace. to keen that as community our is specifically and growth have really approval dates. manage manage very the with deliver our backlogs don't that and of strong when production entitlement, More concerned And very more process I to us. we we others I think the the price, Toll those based based balancing we the be houses feels and sales will if schedules like acceptable if will how are raise and labor,

Thank helpful. Doug. that Very Got for you it.

just get probably you question can of on put share is you might back Marty, return updated has on level obviously to market program, lever But you us back pillar a for guys thought previously? the mentioned in big can that, in that the you biggest that give repurchase obviously running pre-pandemic were ROE focus a you was there, curious mid-teens to the, more be at when terms of Second the because and an the guys which hold of up if at been probably pull, here. kind

studying what tool stock. landscape Alan, and as spend, to tool generation, our it's used in It's the pricing looks future not unreasonable a us the like for use something basis land to the we daily before. the are our that cash We've now, on future. the expect the to of

your go open. Evercore will Hello is question ahead. Stephen next our Kim from And come with ISI. Please Kim, Mr. line

company remembering you than am that or XX% on the speaking at very that sure was strong some make see that in margin number? margin around the is we if a the Wanted the upgrades, My was on to I to right Apologies level upgrades, average? time results. much. When greater? interesting question a just more comment Thanks or those number on exactly that. last perspective it -- relates saw Congratulations your that, higher And to upgrades, XX%. generally on could get I an historical first for you wording what -- in you provide made got the wanted about around

Okay.

XX% that closings. So on was

go be sales to back can it although February, bought They rates they're process, post you finishes. in run back afford studio sale, but generally Design feel for on a people the they have they to from certainly Studio and which the going that design that down, be design pre-pandemic go makes about process may when beautiful been many in have them XX%. in may -- came the they pandemic. We home in studio spend you more home the every So may January, not for

to important with rates just home play is is I the plays no is business for there. just really phenomenon I see little today, are where bit our no So important it and to firmly customize that being more in bodes I want with into nesting out. putting that with house. are, more question there It that the how model. They're watching with They well their them, that out, time and a occurring people think it yes, to it. they more question we'll and so think spending have believe There and has spiked I'm

Yes, no doubt.

give as it sense follow a you go that, history highest curiosity? get, back on level Just was if could we've curious what how I we was us as for the ever seen that and on just high through a to like ratio, if a of point did

That would be August XX, XXXX.

are We the watermark. high at

Nice.

Okay.

figures, ago increase more You it talked give August, in was I was being -- better can that comp? than I were percent you an July, also year any it what the and in didn't maybe August. number some about it. hear better August you was clarity us -- deposits Could and than July missed around they maybe what But easy in give

July, in high In the range was it deposits. XX% for

always some quarter, we August. and I you, weeks. changing with you pandemic got We've But right We and rapidly think, commentary. have I strong. added, let's when said more the front most good comfortable just the times right we market of I'm the information, leave guys, at of was specific in what I things The in prepared were of is comments, daily, that exceeded everybody us. very for only and three It's that. craving in last midst troubling weekly the given know were because it of in what we

terrific a summer. to end We are seeing the

Yes, no with doubt. lot, luck that guys quarter. and good enough. should a be the next good Well, Thanks

welcome. Thank very you. You're

with go question Jack And our ahead. Please next Micenko SIG. will come from

was next year-to-year. on both a price on ASP Hi a down bigger ongoing do How and quarter? feel the year's about count guys. remix last Thinking it community about the we this X.XX point. about X% and morning. growth geographically quarter Good strategy year-over-year, Down step to

we these reduction go of in you kind of on based 'XX are or and into forward view? where in open we of number see terms is at do the ASP new somewhat terminal communities, about further thinking overall, -- a as XXX Just a velocity we -- going, that

price, Jack, in mix number XXXX. acquisition of of have and added We're think and of a will I bit our so are County, to County, where the fold, LA some in seeing expanding good all offerings do where mix our continue that product not markets, those driving lower is and luxury in the some to bit, the success builders average seeing the lower markets delivery and mix years. that products. lower-priced down we're the of We're great a our success few in to our a geographies in And priced of great higher-priced success Southern is and in shifting comparable California, but affordable including offerings. it to was we Orange

less. We just have

quarter, an We have quarter-to-quarter Jack a of it's lot Longer and guided expansion $XXX,XXX to million, which the range X.XX% County. is it just down less next we term, markets example, on Marty little acquisitions. to into we X.XX%, think some because based range longer-term our the a up can in pricing. mean of of $X with a should the as bit. But builder the to number I float the Orange from homes trend such dramatic mentioned

year? there But more from come variable obviously know last thanks. out think should better last side, dollars in of fully I dollars? G&A the into annualized then program Is about efficiency with implemented the too. we to rate, still and the some the in the Are think I end talked now Okay, million you quarter? about there $XX on run that expense volume expense is And we quarter

that think not quarter. of does the stopped we have in we initiatives. quarter I initiatives took that are last mean But we most this reflecting

study think should reduce to we dollars perspective, and be stable. G&A to further, from continue a relatively we So ways costs the

ahead. Patterson will Truman Please with question go next Wells our come from And Fargo.

and Thanks Hi, good taking a quarter really question morning nice overall. guys. my for

zoning of as seeing touch First, well. your hearing these with strong the plus, and to growth pretty able that count on that the confidence and of guidance on could just just etc, meetings, development plus of just could mean, in is -- on XX% delays being of some boards, the I also, there I we've you're you that's you XXXX community the XX% you been and wanted up level confidence? horizontal know, kind today, to what permitting, level front back city hit industry guess you discuss know, discuss of council guidance? challenges mean I growth issues just you some of

and municipalities right signs Sure. shut the mid-May, we a development, until before on down counties start to which from week showed when down, money land development, market how around two land to of improvement, shut Remember go we figured or our and to meetings call. out meetings mid-March May then and spending they was decided Zoom

out, on permits hearings a roads our weren't so processing The how action. month who And children our delay bedroom, like either school let's two WebEx. out counties in having or how have where back work we continue much But to they stopped open strategically part, and putting how on either from Zoom or call all figured that's just their and to just are where towns hold approvals. now fully to ready it and go in, to to meetings public fully figured have

communities so good I'm second news of half you into what were get is XXXX. And that, many telling that there hoping the not to are of the

just being XXXX. quarter 'XX, hoping of parts the now open fourth early we naturally of to pushed and are Now, in were the into

you significant So of portion on what community us know, a that like. openings confidence future look gives a our great

we in that development I as in, the more getting of the that that. work. put we is, are it As be it delayed and own is remember we're We land development us the dirt part balance, words, could evaluate another. will business. one There to exceed hit that will guidance roads or can with in always several themselves delays, for able Last There immediately. you're control. for it. We that the my or always possibly builders, think you allow confident find some year, to M&A. there or land to we open. permit, opportunities last the have more quite acquired that added the companies land that reason lots with That's all you issues are based that that am are land for be roads in, and that There move modest today giving is that opportunities buy Also upon factor

absolute answer I you there feel I your hit to So issues. I the overall, are I tell question look long no to can't tell that potential definite. an at can't it. and is, what's good or when you our beat about really look guidance ability our I But at book,

Okay.

community Okay, perfect. And then then a two-part question could relative more on demand. But the It mean I adult right. currently? terms seems everything you affordable luxury just like bit of And every getting past, XX% Are has you performance? kind seeing you specifically, active issue been order traction growth, your that's in occurring price what point in a is an that working order there? rank with in more I of Mid-Atlantic know the mid-Atlantic just are count? the

Sure.

and call for north but you. in to age for those -- Mid-Atlantic olds that's luxury; it's in until last can late, community the XXX, XXX move down where Brothers, would recover interesting, about age community restricted been That targeted XX more slower communities, empty it out lot Age adult at targeted different the bit home. age price. and where because it the getting of risk pandemic, strongest. more in or a destination generally, drive don't What's going from Florida, is they're Area a That people XX every mountains, a market, it of group strong. they're take recently, same communities, out into a they're drive sense. about but nice put Reno group buying on they leisurely active able are hours Reno, specific, we're it through our they with jump they let's let and I'll to the that a have can a nester makes to Scottsdale look are much. we It's the seeing and chasing it, and has restricted airplane. buying many it's has in and market rank number Luxury, I year Bay two. is the is been back to the in together, unbelievably still cautious the are live, first sun Toll hot three because everybody make and world, over. has to me strong as to very off and in growth can activity hit not etc, age whether demographic, call whether to have targeted, again Reno, Reno, of is just They let's travelling Tahoe been the we and But -- guess, Affordable in and So so access exposed and the threes or high over

doing well. we smallest City age would you expect, luxury not while number behind and Thankfully, City, Hoboken Manhattan. restricted Urban, age So living, targeted, have our number Jersey of units which buildings been in has affordable are very encouraged. is is of -- York luxury and and off a late, as New we

be York, there expect are lately, slow. has have and The New the but had of we been decade, As in Jersey, New hot. Connecticut suburbs the to it it we is slow, counterbalances, some last extremely activity

of the our terms there my to ahead, product, Mid-Atlantic mix respect in is -- So answer. of Marty. With go

I think, May. Sharp late there. our the story, is acquisition Atlanta closed in most year, we acquisition and Truman, of that on Last

So a two-thirds spectacular us. quarter this been quarter year. of for market full of a call it has And Atlanta the compared to

also agreements year. for strong Virginia this last is versus this year. Atlanta We us in are in XXX% year very up

Yes, to Really strength. what's is say showing Northern -- to going Virginia exciting going was great Northern -- on addition in there. I the Atlanta, addition of

go Please Jay with Securities. Wedbush And our McCanless come next question will from ahead.

quarter. Hey, good morning. Congrats great on a

you The are are price guys guys seeing from you you I they able any you? walked back first what guess, may are how, land just, deals and in from I like had. to away seeing competitors? Are the question come have you of Doug push is to year earlier the

we like with never deals -- Yes, didn't that We question back. of mid-March, capital just we was it come it from it this, I'll weren't would sure, away start extending in closings, efficient. what all land wasn't more walk like. due just deals we are diligence, many, but look would August sellers, a to restructuring seeing with extending April, We our early sure extending thought some so look land. weren't really because be

restructured say capital as in And like away from, focus there terms but sense walked were better so is were were not of only of world efficiency. what on make less I'd there laser make the many April, that real looked in better in sense, that our to terms

housing I'm pleased and on we with ROI the market the question the to are strong good, land pay with looks and this now deals continuing competitive. So, ability Competitor up -- focus very no environment, land. today, with or has There others growth good opportunities for ROE. are more to and looking I'm market, pleased that for is the really land our become structure

In terms aggressively very demand on with been we the rates have market, of raising that the strong with seeing, this are, supply prices. we lack resale of pricing, are yes interest with they where

down there same. best as lower because not price range, competition know, can't that much. comment I is the all the Our as I we're doing just much on

for the the is still luxury a other, play. affordable many of where above, least most at Our notch publics, part,

in comment our prices. I that. others raising and But much So can't we on as business, are

of your fashion? them being you then delivered able a timely And sell on where in right. now to get homes about I and talk they cycle these times, question had are other was the level comfort All just the can and

a Cycle bit. have extended little times

inspecting inspections go maybe application. Some a town, protocols, into that COVID-XX job or by in the on homes, officials. delays taking an safety of from think little be limited and turn XX of that is site some I There township are extension many building a we're distancing to and around permit well. health home There on a the the days another pretty that and the less could require that social bit front-end but permitting, managing week workers

We'll attention or is these to drywall manage we have how watch, potential have the stage to to needing that the what as the painter. the hanger, think the I get shortages, down electrician, homes or that some of sold, of plumber, or the need road. the labor

properly be delays, our prepare. so are and think too of aware what's modest of and have, are that communicated properly to and expecting partners, coming We for can fully all I we with they budgeted trade they there some

from with Merrill will Please Bank question Your America come ahead. Lovallo next of go John Lynch.

thank guys, you taking questions. my Hey

to The bucket as mean, well. up first you significantly as clearly are in offset you're lines, And significantly pretty the seeing, rise increases pretty structural I magnitude I as what you along anticipate of alluded that seeing in are costs sort materials same you're other to, Are panels today? one, mean, input needed what lumber of there do up meaningfully? those prices the very price

on market would building X% good of we which will very strength, the the As in good the that into focus or last we with home. be have and goes will material for believe it of obviously price a $XXX,XXX, are dollars construction lumber. with the it increases, increases. the be could is months, materials, thousand one shape, year, It any couple would very in I I be $X,XXX managing been I think versus that increases couple big prices very like in am a the the average we those through modest, a cost what we other we of a quarter, confident manage our with offsetting continued strength is of of and are and shape what of achieving feel terms house number to If call raise increases,

couple of then terms the that you in expanding that's acquisitions Okay, And times the you today. luxury a offering have, helpful. call mentioned in of guys affordable

that privates? curious, on public exclusively Are I does acquisition deals? smaller focused mean, you potentially include initiative Just

entry pandemic focused builder the radar a along, put Last the M&A. and date, that big to on the adds private on back couple gives with worked the we before have or local acquisitions. There small something a that screen on continue, look could bigger a we for to us. well, say very a focuses at was add-on but those It's will not at come out year moment. moment it's playing new market an into us of an small we in hit, discussions, has markets. we're It year that our hold. we're deals operation was current exclusively for of To not on to some We're in group and existing one the

Bouley Please question from Barclays. next will Matthew with go ahead. our come And

margin just points that extent for event? I of about that, lumber basis I you believe fourth the prices, thank what or XXXX you driving guess a quarter. to Hi, secondly, gross to I is questions. the is XX the wanted the factors Thank into factored are lumber sequentially? taking talked more you. about there's for ask about and guidance mean firstly, what I step down just

will homes nine them of lumber right XXXX most lumber event, the delivering are think be we quarter. in I now, to ago, as XX a in fourth months the situation with purchased

of gross compared is in I the quarter margin mix. driver fourth think our to third the quarter, the biggest

It the XX quick out it's be and quarter biggest in more normally its anticipated the deliveries Our forecast our the not was or was quarter. will it into for basis of and to point greater deliveries, than mix of be mentioned appropriate fourth good -- fourth quarter. out that of the I to continuing change. in profitability probably the third the third than us quarter, that's quick get that the than we in positive, had aspect We

Okay. the Thank you a obviously of lighter that little XXX Marty. usual. secondly, then for purchase lots, than And

that than you. of right longer mentioned of land little from and an your hurdle prior lower I investment does you also You There's land effects those the guess, here? rising run what play mentioned now pause might period that rates some and how are average implication kind of hurdles. land maybe a kind lifting land QX. competition into here? for guess existing and position a I Thank lingering underwriting prices for versus But healthy the

Sure.

to capital going comfort with There as But more need fully, the to know, be we of improved, wouldn't efficient need lots So I controlled, our a buying. owned opportunities it. mentioned be recognize are get efficient. ROE. We XX,XXX -- We be we and with competitive selective. course or it I'm you behind probably, not would into -- numbers it college, in semester it plus but could would online, pretty the underwriting it the specific take with our and be more recognize us in are those land focus drive very -- structure. goes to be flexibility gives to to to The the on ROE great XX,XXX

land builder. financial it actual opportunity joint a It can can with doesn't Sometimes a banker, it with the involve land venture a to seller, opportunity involve a involve have can another partner. joint venture it involve

deal Smaller higher between nature, So are the structure are flow. on because really upgrades, prove more time turns. good luxury time the luxury, able We will take deals we're your and there time, construction ROE. affordable that homes, We're that a ROE for to our land has contracting We're delivering out, and know quicker long cycle higher. of seeing focused first opportunities home. faster to leads good driving some affordable is that land its less And by business. in which naturally end to there

important new we is to it. very standards, mean are us. we It these active underwriting So on land side, but the

XX,XXX focus to on will to work the We XX,XXX ROE delighted buy of. are improved and in our we I'm land efficiency unwavering to have intelligently. off commitment capital But and and continue to

Goldman ahead. come our question with Please go And Sachs. will Susan Maklari next from

recently, how has more dispersion delivery got your My should of been, between first your more give homes there come the core How color more question that together can that time? will it's you narrower in sense just is, maybe get commentary to made terms I little margin and more product. of you a on us over in want Marty, standardized the expecting be know quick in I kind and a gap that that that traditional you of the but mentioned we

we From, the it be. as good the respect little a sales, think as imply sales, definitely gap not points it's so points one to XX another. quarter as There's was it while it's XX% just was. quarter call it's impact, from will. basis a it with to it a used the to to don't an hope commentary continues, and of of that basis it premature a And talking there deal We're would together. to about say coming XX I big of While as much XX% impact

But are then. quick I today will deliveries a than price had say in they that that at higher early the May were we

quarter All quarter you what been out you're give what and That's the into hear. us good also California, maybe that the there? we trended seeing to seeing you've perhaps a get That's how in Okay. fourth market Can little right. encouraging. as on color over

asked... she think I

California.

What are in you California? seeing

I understand.

down did What the... you put just

there. Company County lower I'm what agreement. when the dominated. the I been has -- used we for Gregg been to above been positive, LA you. shifted see and the we now mentioned, County we I'll LA of still has in out which California -- California a price -- yes, you for It's County to encouraged Orange has we Orange perspective gave but our to cadence saying Orange where County Thank has, we positive. that much it it's than we significantly had more Southern of have company -- is more for shift sales as there have that County, Cal it's And put average by know. in -- has it

give going and So let's every not I'll the for I'm for do just California, it to you the into get state. but weeds cadence

So May was XX%... down

This is contract.

remember 'XX June up June XXXX comps July comp 'XX. 'XX Contract. don't anything the was June July into of was And back of up was we June mentioned July read to of slower easier, to month a already XX%. to XX%. just July the then this because back was of

continuing of is cadence into is August. That the good. improvement So

Markets. next question will Mike ahead. with our Capital go Dahl come And Please RBC from

apartment and friendly. return you're obviously was always about your bit wanted not thinking notwithstanding good and Living a about the the that to profits maybe One return necessarily doing profitability, drive my not focused, results. questions. back to really in ask next discussion years. taking the of can how returns few rental City also, business over context of always slowdown profits Marty Hi. you've highlighted to for number about go Thanks and I the things a is higher I you're thing wanted be Doug current and Nice lumpy to returns obviously that there the

you any few next look So, existing for portfolio either years? different new thoughts at deals the structures in or on ownerships your as or

Sure.

on up holding So it's Apartment Living the Brothers front, Toll well.

locations. apartment like amenities and very our occupancies between buildings the year a Our of building of a units. big terms and these is new. still new There old XX one We are Remember, are in a finishes big, brand the strong. difference

very portfolio. so And with comfortable I'm the

in better visibility of in versus months the off growth our we definitely We think sheet terms longer intact, the with we when it what been are be careful, partners. and we nicely sell what hold the six and up all but being and to business slower. equity what But balance done be last have through will expansion. until continue is will being for we comes have will cautious next the business the I to is that on have underwriting term is four model, months XX The able to we we will strategy to with multifamily still are find that partners

On land, quality think in similar location Toll be have New as to very in and investment the strategy of cautious. City a that partner Brothers were have decade. a able it's find for testament on we've pre-pandemic. We we we are But and we York And to in process, to that's execute. that continuing had I to testament the been a way mentioned the recognize they terms competitive the that a now I and to buildings debt that the lowest Living, right the is the

out several are selling built of and We occupied. that partially are buildings

buildings And those most we them just cases of out. with and have few sell. cancellations also the very complete sales a we few will units construction will sell have plenty continue to we stages later that we are in that we So buildings will and in inventory that have of

Some of those are venture. in joint

we not vertical. go our have do before We risk. evaluate And acquisitions, will they or of the So minimized continue the to terms future they are land we very efficient, have where market reduced where construction, sidelines. couple in wait -- holdings, we of also had started capital a are we on we and already that are

it. Got

second you. Thank question just helpful. That's My the lumber. Okay. back on

Mike. Thanks

there, the know framing... Back I cover, because needed ask the side, to lumber I wanted $X,XXX just a you're on clarification to

for I'm a I sorry, you heard. $X,XXX you there out said cut minute

Sorry.

I comments compared on the a be So and average, because that year-on-year. have you're lumber spot I the home still lumber higher a costs, $XX,XXX bit you you're more but and what thought for to your $X,XXX in would might might cover obviously that scale price on doubled just to wanted the clarify package total the to on framing range are package than panels around

of So having how very a that of is guys of a long nature lag much obviously you just delivery kind cycle.

that So that until you've different just something versus year next not rate being an been... impact

I demand. for home on for need plants think for on-site where for oftentimes in inventory the it the we for next panel just framer our when rate we our a lumber, in plant the future was lumber contract two. take or quarter. or we supplier you you price the lumber quarter Or can't judgment at next we markets, with rate the because more may have look spot and our based spot Similarly, non-panel today, than

as I most industry been many industry have the and the And lumber well. spike year capture seen ourselves movements. we forward So contract revenue. some of mills pricing has think will excess inventory from prices are in or And optimistic to protect rapid think I that with as this capacity add that

from come with And our KBW. next Jade Please go question ahead. Rahmani will

you support how a willing factor believe Brother to you represents One Thanks Toll multi-year any forward? wondering increase out a closing. the new a could around Could whether you of give basis the in long-term that that demand as the sustainable are in to anticipated is thoughts terms that? average argument pull perhaps far is could contract view very or seeing was we on if is home much. I provide

Sure.

that before were up first remember XX%. Just the quarter orders pandemic, our

the housing I rates house going good interest versus stay pull not about do the demand, story to spring course some strong, and already home So optimistic. place incredible long-term. were time. market $XXX,XXX beginnings believe have really like talked that of this higher at seeing I'm at and and there's season. we the selling market The a rates forward feel was so was housing $XXX,XXX of no We feeling for nesting. this strength low I I are believe and will of

not jade to of to we The around high run. desire of space about is that and have and it associated at the our you at of look appropriate The accommodate desirability and of then particularly I'm workplace sanctuary a going to safety the price aspect, like the is outset that. rates, in a talked what's think a or of is, this point And and long say demographics feels at have millennials to low the more home if the call, now, sure flexibility with kind another I factors to space our reduce going it the some be as they're years time. work-from-home future. place right

our might during something they in want this pandemic. I think circumstance are of second have markets gravitating homes in a those as in be that been we many didn't also particularly see people caught are to who to

can't -- New, there isn't new. the I overstate move to

Many been New new. people only as people's mind. looked always on at

they the in that's to design think the way than can house they design want it lived ever. I it. Nobody stronger

it's office it, a out advanced fit new bedroom buy try thought used the and in create for to home mom suite the to of renovate in by us, try can with an to and basement, home great You architects. for been dad, out create a the a by attic, to

workers the the We the new the kids but in-law glass connectability, suite with that Wi-Fi the have within home so outdoors so that into -- with opens indoors, house back connects the of entrance the house. into back They about home. on in of then from has the sliding highest can main mom or their much like with exterior private can that workstations, is come the living have they The the can indoor-outdoor the offices their home feel and suite multiple the the little fastest technology, handle dad home. own outside,

of the really, we brings to have the trend. going Brothers, a are long-term flexibility the some flexibility of level. been to really of to are connection at ever move well in the that have well family you ar going long-term here the customization term to emotional another are and for companies That friends of think that great what personalization do, home, more the sales advantage In importance addition we through, in of working. we for pricing. with I now their addition working. have talk energy that at in all it, is is know so and exactly what up to health longer and And take resale great pace that positioned so remote that remote I terms many and Toll just that I living when in the the whole efficiency think I no we've of home of market, one requires what homes a look with level brings expensive nesting the about edoing

in more that have their home the to luxury, Our and that at a be lifestyle buyers can we luxury homes, still up themselves look that more we're their move these price Toll now that that Their design home and will and homes mid-XXs want for ours doesn't customize. are And It And can our the their even and sell are affordable have opportunity home $X be points. they to Brothers able million. that they $XXX,XXX, buying millennials affordable now different. do offering to first be can into wealth. they lower more a

do on with and what how passionate we soapbox, is moving tremendous that I seeing am are these being love and Sorry this. the what is the market positioned for I about but we're results. right we into

Thanks for that.

Living and capital in Can us Just a follow-up the remind is on tied those up both business. Apartment you how Living. City much

had... last I update I think the

there is capital. not I guess, much

you wanted cut out, invested. but how have You think know to I much we

answer So chance that one. we'll take and a

invested, is So point for approximately which in decade the we so. a have over us City million Living, last or $XXX low

is grounds and million in $XXX buildings of paused is say pieces in and of projects. JVs it of future Let's for is $XXX a of in it that complete million million $XX near

nearly units that buildings are completed. there those But within inventory are completed

Yes.

are market for That sale. on the

a in we the of yet long-term then or in total have Living, million have stabilized -- or sorry, And capital the we approximately to market have development, in these have land XXX% projects of of them, equity in just $XXX Yes. In our $X Brothers million five the RFPs it, not representing and projects equity there's Toll some buildings. we investment -- which in of cases gone in of a gets we net to development, of of efficiency as Apartment outside.

that down we equity. as But bring comes in

Right.

in We formation JV expect next so to recoup months. the $XXX million within XX or

much. you Thank very

And our will question JP come Morgan Michael next from ahead. Please with Rehaut Securities. go

Thanks. for of afternoon Thanks Good you taking back to to wanted a or -- now. my question. items hit couple morning and good earlier. I on circle

of and broadly speaking. hit quarter which on what and of First, strength there great, as August, continuing well, we're into the obviously with hearing you the the trends kind some out consistent throughout sounds

little being to monthly hopefully, you pace be May, of the of around a throughout sense June quarter, really per into trended a as there better of that of could sales record that of bit seasonality get year. the back to to and context the would per kind June, is quarter? into bit during a helpful. average -- little But through kind of walk the down and community You into play orders, referred Obviously months. half monthly get get that the July, month a comes if I July was hoping break how or orders August, you

but we please I gave me, of help commentary August, hope think in answered then it mistaken, the we Mike, So, and detail. what helpful good monthly answered like I question. year-over-year I'm your on we cadence pretty when feel was you I agreements, If

the I data quarter. incremental The side you course through variability a was there we communities don't level. in on number enough the to the top our gave of think of

go. There you

I after the on help can others. guess, time maybe couple the pretty call. I have does you're community for that, saying Maybe steady. was of that. if for this and so Okay. offline kind that toward afternoon I of that know, we end then, the you That follow-up thanks a but guess of, count solve just

people be that's the obviously quick. I kind now second communities and wanted around Doug, price. of pretty and in how you currently. of can pricing clarify, most that that translating across your demand the all focus have new into just to or that's of the this robust terms I appreciate you're mentioned right commentary raising a prices derivative So

aggressively word raising the used You prices.

would the if over to on that cover do you're aggressive. it costs you -- $X,XXX it's year, quarter, that doesn't for X%, be say a currently seem trying about home talk you too when $X,XXX to the for lumber So a would next what seeing let's

quarter sense to of kind if average, I current So a and of, price get or what raising to your but might month was how extrapolate full-year today, your increase hoping you'd granular sense what into get you're by too cadence to, that of prefer not price on appreciation a a not is, by just rate? annualized

Sure.

the that That the But have board. is the at that raise at homes demand, next total, across Generally the appropriately. eight five extremely in the raise that on we a and price based price every not in given I local we raise the strong it communities community. seen week correctly. communities, I to sell in more aggressive, if when in are and To not did at I react selling hope weekend, and that some that type week certain the individual locations price had demand a of it we're and to five wasn't next have I intended reference if was aggressive. results week my sell apologize, And markets we eight we call clear, Monday. And in not I'm homes again community next Monday. we're the week. we on there going that suggesting one So

are to sure make word aggressive the have and two doesn't have want least taken communities, said that last more of Very, few I increase X% than have out the there than that. a With get price our less had months. that had at had many that most So context. of very over

So one, but more had than go of have I as I'm Mike most had less one about least very I'm at going one, many to with think to far than have few to it. had go and that's as going

could. last One one, Doug. if quick that. helpful really I I That's appreciate

You of at now terms a good and could purchases community... want Obviously bit of you great auctioning the mentioned had kind of ROE focus holding and that your on to going. XX%. and you're improvement there little right Where with you lot -- progress see now lot a see you're land in back

goal we're the to making XX-XX maybe where and once goal progress. XX-XX, went think a other but if it's out heading there's But XX-XX. a I have one I to since cut days be goal we might out of good get end. I'm I way bit. line, to the a the hope the we only I've I'll You We're XX-XX. apologies on problem of not our And sorry, the think. great to -- right old but it's now to you're little you're our there. getting to I that get cutting cut had out. not

in. land many efficient, with ventures are capital that or deals seller more that be make terms new restructuring a existing We them through just joint to whether different come banking deals and

extremely focused are capital efficiency. on the We

in moving that and in direction continue direction. is it right it will the So

may be not linear. It

Correct.

the of timing acquisition around of on the bounce depending may particular land. It

Right.

But the that intent is direction. in to move

Thank Perfect. you.

Thank welcome. you. very You're

Thank you.

Ken with KeyBanc. ahead. our next question Zener go will from come And Please

go I back just back. two have I'll to questions.

you're that you a second would And that question. little younger that about That's think a specific... year lead to would talked backlog your backlog longer operationally It's anything that the one given just construction first one cadence. post-COVID change. have you year-end Is backlog usually first related usually seeing year-end, the of is there cycles. So your forward pattern more my deliveries. With you XX% about to

I guidance. the think in our that age the it's in backlog got into

was the on think mentioned within of the given social times drivers. of and we site are third I prudent the As are months. with the been job associated cycle guidance Doug some which distancing of backlog that those sold we've main and extended the couple in the then about, And last the talked we've

as I as turn for grows news and more -- affordable the good segment a mentioned, do news we do bit they hottest that's houses good us. the that is that Those luxury The is faster.

benefited, I my weather now all. West update, it's bit is very lot where delays work-from-home maybe East to oriented of what in New have of the a York saw say question crossing, unrest... but second large the metro, opposed is given environment. in effected in and from you there's Coast as metro a how then rather for let's appreciate Can as that suburban I had perhaps Bay how, December industry, been crossing different a Metro that. project to And been opposed tech the and more you kind would very Portland which cancellations demand guess then oriented we But

Boise Texas, higher from Bay California. sales. Sure. ss to extent a Again Austin, well area more you're suburban an everybody headed. know where that the And an Reno little It overall, and then the question benefits example. more the I'm apologize into some doing a and percentage California, is but us, out with is I as large of Not there, we're of bit but outmigration example is you seeing pleased leaving. to cut Reno, other into markets Boise our from traffic There is is that for extremely I and no which from

but still we're are that I right LA that which York, -- communities, have we They're County for and well. mentioned and suburban. is and sales Some so right city staying seeing markets with the but are in the New all suburban I'm us, not very many San doing the we're are there pleased it's seeing phenomenon. Francisco. same suburban already

tech it's but mean to a doesn't pretty the home, areas to but have cool to it bit live. cool working, eye That sure, in the with that our place for the liberal expensive, a just from to be Francisco announced they remote It's San stay term live. going their have area, runs. -- seem there'll that everybody are because they because longer going are We to place more may pretty companies but work on a mean

and other we So very overall, how those do I'm want leave in for who in Area positioned California. I'm pleased Bay to on with ourselves pleased what's with those the going markets

will with Alex question Please come next Research your Housing And ahead. go Barron from Center.

my taking for you Thank question. Yes.

driver took joint sales income, that. a big step in like of this in So quarter. quarter some year, that communities next apartment and land think especially your of I was delays a of And pretty last year sales and I This stuff was other backward, the category venture earnings. and guess it

or do look least will you any you directionally will at next that -- like? So year think what have guidance

the market intentionally in we to we've wouldn't chosen price. not be apartments here uncertain non-core year because, market some conditions think Alex, bit a are assets and Well, favorable 'XX, it to of and fiscal the six back some months

on bit put expect there to out in but those on to a too 'XX we We think XXXX, as point, the at we're not settle guidance uncertainty there. going give is market because things this much

the My second or it's you is do was segment trending it. population. question you represent Got give your up is percentage year? And it adult last of Can business or that not? point What today. this regarding guys us at what active feel

out and Yes. nester was the recent think I is travel destinations. being more is legally that mentioned that adult and slower restricted back up pleased that so you whether August return very buyer in age for world our or that getting to as in I'm the targeted restricted some of back it's call But empty activity. or crowd where cautious gets earlier age active with locations out it I I'm encouraged headed. in is as

any of it percentage is? And what sense

have sorry. I don't I'm that.

our turn conference session. to concludes for the question-and-answer Doug this And back I'd Yearley like remarks. over any to closing

XXXX, certainly everyone. time Please we of enjoy today. Take last healthy, safe, care, Thanks unique Thanks summer your for and few you very very the much. has been have summer. weeks a stay thank much. of stay Cole, everyone which

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

disconnect this now your may You line at time.