Toll Brothers (TOL) 25 May 222022 Q2 Earnings call transcript

Good morning and welcome to the Toll Brothers’ Second Quarter Earnings Conference Call. [Operator Instructions] The company is planning to end the call at 9:30 when the market opens.

During the Q&A, please limit yourself to one question and one follow-up. Please note this event is being recorded. I’d now like to turn the conference over to Douglas Yearley, CEO. ahead. go Please

Cooper, Good Gregg us. Jason. Financial and you Chief Officer; thank Rob Investor Finance Thank Wendy Senior Relations; me morning. VP today joining Marlett, Fred Operating Chief With President Officer; Chief VP are for of Parahus, and and you, Marketing and Welcome Senior Ziegler, Marty Officer; Treasurer. Connor, and

assumptions website. and inflation significantly in to results. the availability I our rates, statements call about our many world I the begin, pandemic, statement labor the affect future I and many of read on you economy, beyond events, ask night could caution and you our financial release that markets, on the that earnings are forward-looking the of housing other on interest materials, and Before factors of forward-looking last impact control information on this based

are to We our record quarter home as average at in XX% an record exceeded we approximately increase of with $XXX,XXX, second or a second delivered quarter revenue. X,XXX met quarter all We resulting second very was compared price billion. sales an pleased year’s of This metrics. the of $X.X in homes on last performance guidance our revenue key

quarter margins, our at up At to share significant revenue points year. quarter second compared than approximately half we in our points margin last adjusted homes XX $XX.X XX.X% year expanding second by at than for scheduled XXXX of our quarter XXXX, to Based Our delivery with gross gross was We challenging a basis segments net when basis $X.X in backlog strong guidance. to our production quarter last highest QX last quarter and teams XXXX’s year margin pricing in the guidance. in quarter, better X,XXX points fiscal and in in revenues, better environment. our billion as dollars homes. dollars year’s and per strong to than and the on XX% contracts quarter our and XX% Sales Driven basis our of geographies. second billion, fiscal and our ever extremely across stood job end, of did backlog demand XXXX’s. margin generated XX,XXX compared embedded and earnings a be strong expect XX we backlog buyer to SG&A great signed XXX up record of delivering both was of improved year Adjusted up for continues second all fiscal what a very orders were homebuilding better XX.X% $X.XX, expense, growth X.X% in remains be year’s compared of XXXX. over were second

QX back we for Our community quarterly X.X consistent on contracts per in with sales that the our projected earnings February. call was pace

having all While mortgage are increase still and buyers buyers and rise stock some anticipate impact over buyer we steep cautious of an that pace past rates the since remain it rates demand macroeconomic concerns inflation seasonally substantial market past as in and mortgage solid, the January, prices, from month, unprecedented in months. summer through on slower volatility sentiment, years to is higher the adapt The the home has conditions. X other moderated may

As construction. on we reminder, catch quarter, a the up in to sales limited second

are We in this strategy quarter. continuing the third

recent the buyer, moderation, than we a more lower normal about over our sealed are years our Despite recent processes The running home past sales, successful bid slowdown Even have demand. place. healthy. firmly with the remains and driving the life many occurred fundamental in what are supply in market XX% prices is raise in XXX that in greater to restricting over month, contracts number continued flexibility for and million QX, and QX of from The remain cautious demand housing the of communities housing market combination we resulting in experiencing communities. and limited best-and-final particular, of inventories, an the These migration a of we drivers to driven events millennials in normally and summer trends appreciation pre-COVID. that expect the With be have and a baby-boomers imbalance workplace new homes, decade underproduction, favorable overall supported demographics, retail homes. by include more tight the which

rents the ongoing and will the long-term. trends addition, single believe is market housing dwellings. demand housing to In in in for multi-family and significant for-sale from these continue benefiting increases We support

they incomes loan-to-value. in believe of from customers, affordability those cash XX% many take approximately to their we worth have and from concerns. insulated Turning mortgage in average significant They our to appreciation tend specifically Approximately price all net and pay XX% are generally customers existing better do a higher who our homes. have benefited

utilizing jumbo buyers than X.XX loans are rate conforming the rate. our Importantly, a that lower point benefiting from remains

and and homes midpoint. be full shortages delays, to a reduction full we revised be at deliveries expect homes, XX,XXX by chain XX,XXX about year now supply continues municipal We disruptions, industry of deliveries to guidance. between our As challenged our labor the year have XXX

increased the price However, to we average home our guidance delivered by reflect strong pricing have our backlog. in per $XX,XXX

our of acquisition were which XX,XXX second billion controlled We committed year of year and of capital strategy. disciplined committed full XX% to compared growth were XXXX. quarter, owned of homebuyers and controlled As lots lots, midpoint land guidance a remain are revenues XX,XXX our result, At the XX% the our to homebuilding our $XX.X Nearly XX% end already or in owned. we at XXXX or efficient fiscal to these we fiscal of expect approximately backlog.

conservative costs, evaluate related more we incorporate and and land more assumptions This the contingencies our selective standards represents our for sales development pre-pandemic, deals for needed was as controlled us sufficient position, gross with into very and lots. can land new higher Therefore, paces. margin land much contracted provides land growth XX% IRR underwriting apply of of significant well land higher that these, we rigorous and to thresholds, for construction Excluding be which future.

focused another far and have end year quarter. our repurchased $XX We second also of $XXX.X return our beginning the so third on our million remain equity. repurchased million fiscal $XXX about we improving common Since of X.X% the count. share or our year, million we stock In on quarter, the of in

have nearly current week, March, paid quarterly that, it increase also I prices. just in our over $XX delivering to an to million We debt XX% of in and Board turn and XX shareholders. year-to-date $XXX on to our dividends million authorization million In retired confidence approved our the to and share in first dividend, our last refreshed shares long-term quarter. will Marty. we With our in commitment million repurchase business $XXX or our actions reflect based These returns our

delivered The and price signed generated our we X% $XX,XXX billion, of last year nearly average fiscal X,XXX in second quarter Thanks, up compared and of Doug. our In X up up year’s homebuilding units X,XXX and $XXX,XXX contracts XX% selling quarter $X.X second from second ago. homes revenues XXXX’s $X,XXX,XXX, year in over quarter, to in dollars was QX.

to $X.XX income diluted XXXX. of ago. Our year pre-tax fiscal second quarter compared or was compared per per quarter million income $XXX million to second share million in the and Net $XXX $XXX diluted $X.XX $XXX share was X million

was points demand adjusted compared price, was projected. over of strong quarter better The XX.X% we improvement primarily year. quarter the gross reflecting the due had in XX.X% XX to than XXXX the last second margin to second basis environment Our and

full to continue adjusted We margin the of an XX.X% approximately project gross for year.

margin We expect gross which in excess third quarter XXXX in quarter. to implies an XX% XX%, for adjusted the be gross fourth our adjusted margin our year of fiscal of

in adjusted gross power of backlog over better As primarily even is past Doug to mentioned, than the XXXX have experienced composition fiscal year margin year XXXX. be solid. existing our this we pricing will year. the fiscal of and is year’s. Approximately to backlog we projected are half And XX,XXX This backlog homes believe this of our our the be due delivered

invested ultimate they appreciation which been also Our homes. cancellation significant. are our $XX,XXX, consistently make personalize those home which our non-refundable buyers and and to financial They rates strength any the their for contract from which the benefit delivery, a allows emotionally price been homes, invested of decades, has customers they model to averaging the build-to-order lowest becoming deposit speaks financially many industry in in between have our signing plus as

result, we or quarter just second had XXX X%. the about our in homes As XX,XXX cancellations have a over in backlog of

We haven’t seen May. significant changes any in

quickly any me Let mortgage future may have on address concerns rates that cancellation rising rates.

rates First of mind on of that Fluctuations all have buyers keep interest should in impact no these pay all, XX% buyers. cash. our in

additional source rates an estimate alternatives a have than of points. were XX% income balance X%, would such consider also have higher or our consider that increase buying of to backlog our down if XX-year pressure-tested We with provide backlog. for less to as rate payment the down arm, conforming to We upfront other of the

significant risk rates close, were and means these to have appreciation, lower, buyers to remember, homes attest, low enjoyed older As cancellation greater rates. our price our increase backlog, even in which less homes have have And quarter rates remained the in for contracted motivation their interest have our committed the which when the in don’t. buyers were with if we rapid new second they

and was Turning than year points The our and sales lower XX to in by compared XX.X% marketing as and was last in revenue was back second of QX primarily this better driven revenue projected. to growth the SG&A of results, quarter improvement percentage XX.X% spend. a basis we

venture million quarter longer due we Second on Impairments no our million, of of the a other income $X.X $XX monitoring bulk $X are in home from guidance quarter, and sale security primarily million, sales write-offs deals reflecting were accounts. to sub-cost land joint pursuing. and land the was that exceeding gain

guidance ratio the credit $XXX debt We This ample per billion with return our quarter cash capital end, $XX of our under to the and share book this At solid by with our quarter and with shareholders. $X.X both in value facility. backlog, quarter all XX.X%. grow supported to we provides year $X.X capital to fiscal the expect share our midpoint bank billion flexibility and to with end. revolving $XX.XX. at equivalents us was of a rate Based tax finished net available on per in approximately and XX.X%, was be million our Our

XXXX X,XXX with homes, $XXX,XXX an Turning projecting deliveries year are of quarter price average fiscal and $XXX,XXX. to third guidance, between we

production. impacting municipal are chain As and continued and constraints Doug labor supply delays mentioned,

guidance delivered a full delivery backlog, based have between pricing projected $XXX,XXX result, average year our guidance. on homes XX,XXX. $XX,XXX and we between reduced to $XXX,XXX, from our have approximately XXX a we to XX,XXX prior increased increase in As price But the by our and

approximately be in quarter We leverage. reduced percentage full project approximately X% third we interest expect a cost of XX.X%. and as quarter from to third of in revenues the year for as our benefit the continue home sales We sales to be to SG&A

as be full SG&A the home approximately sales a modest our from XX.X%, guidance. year, XX For revenues we improvement project to percentage a prior point of basis

of XXX We expect approximately and end year to fiscal count by at community the XXX quarter third end. be the

We land approximately unconsolidated $XXX entities breakeven have delays prior municipal impacting full for million community lowered for the projection income our full land over but our quarter, year, of be income, development. from is gross count increase slightly an supply is million Other expected disruptions third guidance. chain due now to year expected to and be and $XX profit the sales to

for guidance rate We third apartment-living XX.X% from primarily assets. quarter fourth $XX and for the therefore million, certain the the XX% approximately of of for is sale Our the tax projected year. quarter

on shares is count of earnings per the project for approximately million we in full million year expected Based average these share XXX per Our the share on factors, share all full beginning quarter. XXX.X and for approximately year to to continue $XX weighted third equity return and XX%. a be

Now, Doug, back you. to

Thank you, Marty.

questions, home employees extraordinary open customers to it quarter. Their I’d buying is our thank commitment our up hard I of to to work all key experience Before for their our for success. providing like this Toll an

Jason, questions. me let to Now it open up

the first Thank opens. Our company question Lovallo a Instructions] from call go you. to Please [Operator Instructions] planning the from comes UBS. As at is market [Operator when ahead. John reminder, X:XX end the

questions. my higher taking today. for a level you couple of thank And Maybe guys. morning, Good ones

which middle generational The the of many receiving on kind forward? just buyers benefit largest of is millennials the one, probably from trillion the ever transfer and probably Gen years, $XX over we’ve in boomers, X the greatest XX we’re I’m of first of your wealth payments? you the what down how seen. be for industry sense could have if that are curious assistance And going next any of

you the – pretty buyers John. Sure, and it’s about past, first-time XX% this homebuyers. We as consistent we in of quarter, told are our

traditional a expensive I’d call Now they homes are than buying starter what more home.

And team BMW. comes that. don’t I’m know exactly Marty talked not with can X our we mortgage I’m from. not you where that – I we – about, I it’s Series I’m As sure get whether give you. answer. sure can’t But our it

helping bought mortgage school. out mother I I father lot. just was law I at think amazing are – mom of my house I a and and dad getting because my guaranteed XX, didn’t and first my have out

So company my was the income. I my maybe couldn’t – not the on wall, by but by impressed mortgage diploma

So and see have team some the offline if specifics that’s can absolutely happening. on I’ll that. you And give we more

Now our home. a I said, is, bit even in buyer first affluent as more that

they saved up. So a probably more have bit little

maybe there that quite lean quite on mom happening. you, I I’m to bit with as that, is much. so they of think don’t dad And have But and is a

and rising rate a mom dad either Yes, John, also helps down payment. a it from continue buyers for a I in higher gift environment, through qualify think to

Right.

know them those can don’t I we stats, and that up. have but we Which dig try

I of received mean Association Realtors of XX% that claim millennials the about helpful. said that’s assistance. they that National it’s Yes, have

mean powerful. it’s think I So I pretty

these occur? of to with guess, is, that, in I does that cushion question is not sort prices? which Next demand where some did and the a of downward pressure pressure between if is do industry pretty at And on are on may that could fair could there would moderate impairments good land that down, securing it there point, along assume too is is land that you we think inflating much this – a if and be your option, mind just And some where take that builders happen, risk prices? lots

Sure. No, the focused too optioning I on are don’t think builders land.

I right return equity is way our think on driving the to run companies.

I you’re to it paying is pay be have to underlying her that less control business. a capital whether other the and buy very you you’re land buy trade with all a you land it and think smart it, not that of it modest risk, modest joint paying on to seller whether reduction I business but that seller efficiency, in that banker back is it interest time, move payment think on ventures but or But margin? a you impact think, and land of over allows margin Does modest your have a terms now margin. X% or can a away for be you that to because outright, it if land time, very land smart with don’t up. banking, all to a a Yes, land need from his land you feed whether needed, impact if and ability, that be land over it own some if pivot when that it carry simply to an effectively ROE I builders, drive terms or the

to good bad stay, cycles. towards So stay I and don’t it’s here to think it’s here move through the – think think and ROE cycles I is I

Toll has and all how with last is the impressed I’m comfortable very the discipline very become Brothers years And few over are by how industry how land. I’m we so And approaching buying it.

Yes. would agree. you, guys. We Thank

worried John, are with impairments, your at respect good. point. impairments question for to we about Business cushion on is this not

margins We in have option for $X XXs of now the land is have XXs. the and right inventory, is that million is to $X of that backlog, And billion the low land. billion generating land, we is balance $XXX upper contracts

Thanks, guys.

from from Please go Rafe Jadrosich Our next question ahead. comes of America. Bank

How capital compared sort Thanks more to taking maybe the now stock, forward? and trading about land what expectation repurchasing you shifting And how you you sort priorities give book color You current for land the bit a a little of at color? of end little prices of that of sort little allocation are which your higher buying my the having mentioned the expect your year. is everyone. the at you going that’s question. been below think you value underwriting. where today hurdle Hi, for give a on bit. a just is do sort then Can mentioned also more of bit of Can return

quality. controlled, I XX,XXX-plus us position. homes think, position. very more owned. made that of proud I’m pivot than plus land owned We have and selling, have optioned we it, how about year, our all it love even To minus, buy time. good It’s to underwriting. Main, business still we’ve our the enviable is or We luxury of that’s really XX,XXX lots Main, Sure. puts with of a And call land block move, a, land We the structured, or the have in talk because position, land because of Main it’s of at we Main the are that and off – tightened land, it our affordable okay? a but

We expect to buy less land.

show the growth place We over of in land have the couple years. significant to next

to up not it’s land count, ready up it we yet I’ll tell XX significantly. based community should And to the up. going We’re you, going but going be guide it’s have, and on

that, we’re And of and we’re that so year costs and combo X And look underwriting ago, we’re north of that of sales ago, XX. XX. basically frothy combo And about top at was on not it, putting IRR. hot the on months X a off of And the combination was gross super was of we land contingencies development. combo of XX. doubled months margin we have ago. the a About pace, top top today, And on call putting contingencies building that

actually comes pace market We’re when land assumptions to and conservative being the for more in we homes. start when we sales that throw selling

that up down will it have teams? land buyback debt, the freed because Yes, give dividend message you but buy to reduce I’d Has weeds, And Yes, a questions, to hopefully sent And that’s it’s not goes use to buying? to plan. Has our back opportunity all the we has. shareholders significant get it the it and flow? how up, has. and it weeds, will. Yes, a nice the has it slowed in getting the but for or of the asked stock sorry like our – into to continue continue hopefully So moved. it that’s to to stock. And and cash the

a that heard I’ll value book my mention few bit of we folks so a was garbled, repeat from it. Rafe, maybe

value year. end it quarter $XX be of at of Our We the at to project end book was per share the the $XX.XX. the

helpful. really It’s Great. Thank you.

Evercore The next from Stephen question Kim comes from ahead. Please ISI. go

the of your two? guys. bit today. XX% seeing highlighted, Can demand a your for the product Trey, us think you Hey, luxury what’s luxury kind ratio tell we luxury weather communities sales, you affordable a for Steve about your relative little in luxury total typical under on but products? performing of change Like or from they Toll only that is who’s instance, rates? moving rates as your your between insulated community, buyer given is For how that you the do the is actually being restricting true cycle than This affordable how bigger times if traditional affordable and are pretty to metrics not communities understand those

Sure.

market Demand going to really question think your you’re the because answer that’s as I we’ve So month the we’ve I’m good. said, the still made asking. is in still last And good. relation is about to comments what

and with than performing bit in Europe, luxury active luxury prices the would concerns noticed adults. have caution the expected, over that on is in the with being the specific we that’s to stock as question, and affordable expect However, as what’s and that. with And did going from we with expected market we some with the with home month inflation and rates worse all your would buyers. little last have and up place We a we going all also on see

example side important. operation, to and that the mean if not the of down As are concerned our monthly payment And examples to I where or look business, that’s affordability. therefore, market over homes Phoenix by That about more has in affordable less I you are rolled performed as more expected. that where come look our half But becomes Idaho is what which to expensive of Boise, think areas you’re two means. those well, now has as price, less any an the probably I luxury third expensive, of we good doesn’t

Charleston, or business. been also for last in is rest the month and an slower Carolina in bit South a markets us, all example than Myrtle and Greenville where our lower-priced of the those similarly in over Beach they are we’re have

sense it’s So, common gave we are seeing and results. the for it just I our reasons in

to less shorter are have upgrades. They as a [indiscernible] less simpler. sorry, build They They couple to of easier. And the are are homes. expensive They it’s smaller. time, months

it’s a of So, less. couple months

into that’s be factoring understandable. to quarter that Yes, And down down the very if in there couple next as order for this due down Thank suggests to or the demand XQ those sales Okay. orders? from are it you will in outlook? X be bps Is XX-year trends the softening that. last over much commentary weeks, move Also XX double-digits. you well upside continues could nearly some with an to your restricting the months, of

Yes. really through month caution just in to when the summer hard seeing now signs last from we’re some talk buyers. the of It’s

combination. So the is answer I think a

Now and XX-year we period time before COVID. of went the at looked back

market the may be weddings, because down summer – sales. I June you X softened COVID. X slower have Our return the back of said, in, times in years second as what third in we on go. kids July you open your X sales QX got graduate, those seasonality. didn’t normal those weeks house QX, before believe that COVID, X boldly of that didn’t up But average to that, in feels our and And that’s see from years lower than hit, XX not XX% will be and months looking And was is to the is to seasonal last tend seasonality. like quarter off It May, XX quarter the why I occurring. patterns. you’ve We month about that answer at years because are that’s

our with on and as production feeling. still that managing we we caught are are get so sentiment some up buyer allocation, are We sales we

very really it predict. So it’s of to all be combination those, a of will but hard

are think some buyers – I buyers.

still Now sales. that supply. demand allocate still have really outweighed tended markets are we that many is where we’ve still sales, good. limit And so That’s strong to

have higher than that are still that’s And communities minimum what we through bids approach. amount. of achieving think bid there more I that’s also going that winning is XX% taking our there no We that our are best-and-final I where think the – bid some are sealed But are buyers a measured process, question we’re up against.

the to opportunity control of here It’s using not We’re to sales, demand. limit because sales.

much indication to striving are they do, at want XX limiting moment? other delivery, that’s okay, community we’re here We’re less not saying, catching quoting months issues the months, which going have of sales just with we’re they going the we that that that have If It’s cautious just Is buyer as XX-month better of a back because were when Or demand. we’re long. to sentiment. is I that more and to you affordability of And want we’re all still buyers I purpose facing we’re it a down sales, what we’re think – don’t these being a can X to slow going normal because about sort macro feeling to get and to wait just don’t saying, XX even is to X, months? production. ago, up all wait that that

very you much. Thank Yes.

question. welcome. the Thank for are you You

go Next Sachs. Maklari question from Goldman Please Susan ahead. comes from

you’ve you backlog. the Susan higher should Thanks that the Perron to price my have your price that your you’ve recognize actually everyone. these gained seen? been into for to for and offset seen inflationary year-over-year XXXX, today. support past average results of month, over in XX% houses for in morning, price This is I pressure that in ton quarter up But XQ. with given you order ASP continue ability question. Good to a Charles taking change the selling any those push get Obviously,

Yes.

drive exact That’s We still other willing up lot how our a but But offer are increase against clients it is to. been to continue the price they per to the do sheet. not much have that pace. it what increases where an each bid years, to So price we X.X of this process approximately the some at is for quarter. X% not our of and best-and-final pricing quarter, own We pay, let expect decide even it they to Part last price every and running power. averages we’ve that that’s higher. out

are still limited of in a We raising prices today locations. number

a as head I’ve we of still process we several increase But the the at have about X% of our there. times out to mentioned offer As expect sealed say and we expect talked have don’t moment, don’t going best-and-final to bid now, that communities. XX% the seasonality, particularly price I we into quarter. summer continue will we cadence we no incentives

to need are drive there are the incentivize to that out There sales. feeling incentives. no contemplating not communities We’re

the whether release said why With that’s I good quarter a that do continue. per we I’ve my but in in to not the ‘XX. through exceeded we’re the our pricing last margin and XX we on over hence, are in offsetting cost increases last expect that in in So still X% comments than and margin in have to months, increases increase increase the pricing, night more our through market, cost guidance respect

We plays pricing the out to see we summer much have. have power to through how how as will it

drive the up, on control increased are mentioned, for buying going our higher. and to do that margin we I those contingencies that’s mentioned are our we’ve still our gross land not ability but over costs. costs open just I like feel While we have communities that and our contingencies, we increased with have good comfortable

the the – know what I that pressures. over see wait to So relate will we power develops next will think how call to pricing X have and to cost months it, let’s

can flex much slower to if be provide follow-up, see I going very forward? like expect demand But said, very community does community ground there And you we any how change you XXXX And That’s you an expect, trends Thanks outlook is your for we this. growth a on understand count up if guess outlook see if sales to color. to you were as update year-over-year. good this community maybe I that to for I to demand? demand your protect your going forward, were slower count opening base? way moderating that

have flex permit rare. don’t We community life, we against that is in feel gaining if but and work hard that’s couldn’t of are we a only always Usually, the we time up The very roads in and our some to get can permits entitlements, lose shelf about have that’s or to expire pressure. openings. we pretty years the we long

not So, forward and if the we and detail decision with then, costs go. for that we and we the And financial go of community put homes model in great sale course, not beautiful of going conditions, make move the to or pricing. haven’t market studied open and to roads in current metrics build are

there now, right contemplated. of So, is none being that

the land. have We

ready went likely pretty contract, idea up. of control in to a COVID land, put have either before when pre-COVID Much early open. good days was when gain we we as that under of are land or land entitlements the to We this more we this and of two-thirds prices

is – if opened of positioned are margins ‘XX, in we land this we that the should. suggest on in in new is that in sitting there later to ‘XX ability pivot so lot a or but communities And be conditions and terrific to market always

fewer a would plan sellouts what not, we we slowing of because we But than community change short-term, will to have I it the in currently to count growth think sales in probably lead actually project. open. short-term, the

Thanks time. color. for That’s very the good

The Deepa comes next Securities. Wells Fargo Please question go ahead. from Raghavan from

Thanks broader you momentum points will exiting able before? Are order point any April? data for on off even Hi. that time you question. a provide taking are quarter in I field XX% on. Good in start with this to traffic May a auctions was at everyone. What or morning one. the mentioned Also, that still

question. got I am second part of sorry. I understand didn’t traffic. the the I

to was The get We will XX% what? that.

that What quarter field that before? mentioned. a The auctions you was

of and there which Thank we web It’s eye us, prior Mays, May, Best been it. traffic, see the don’t modest pre-COVID. that and you. more that an Thank you. pull Guys, and have through it talked traffic slowing on off. we up with respect in patterns are with sealed to is but we two nothing why but seasonal the that month of foot is final about alarms didn’t has keeping you consistent a the traffic

web And a is and seasonal foot so traffic basis. on typical down both that

web foot are holding those their that encouraged that on e-mail either definition request lead make the in traffic through people website to office time by seeking then on the up. down, leads, call lead becomes an or the that what the sales more a amount percentage pattern. traffic send our consistent website I as is We But way our information, our we of which to of mentioned, is of and are seasonal spend

In the to was terms at quarter, first of XX%. it XX% in neighborhood best-and-final offers, our our now end of at of communities. And XX% the of it’s that

you, Marty. Thank

of second but terms year portion that’s Yes, guide pullback X,XXX guide? it’s it. is portion unsold in there. just Delaware Thanks. the in curious, because the X,XXX ask within backlog the Within half is I a the am unsold Got in to a QX yet? means guiding are there which on you of as there QX. closings I is follow-up guide half, But sure that that’s that’s XXXX, approximation still for Delawares well, an My And helpful. closing units, guidance, full implied roughly

that our the again, or from actually, count our But And could back inventory. to to spec till construction and trying under sell sell come build amount. is more we are we to up X,XXX a spec normal more. Yes. levels. we And normal that probably are That’s end There there of QX homes to would of the expect – end and settle QX. XXX units between

and thought. Got the I luck. it. very good what color. Thanks much appreciate That’s I

Thank you. there strongly, are have And Wendy I we we I I have you, That’s been place. incentives. that $XX,XXX said ever amazing million one no, Chief quick customer the feel we is I may that’s to clarification. and Thank our give word greatest think sell seen, I said houses, But towards Officer. When $X clarify even million place. when want and what to market very the make Marketing Marlett, in them upgrades or good. $X,XXX $X in in

that clarified. I thank is to incentives you, that increasing not I Wendy. And just any are make We – want want sure to anywhere.

Our Ratner Please question Alan Zelman ahead. from next comes go from & Associates.

questions. morning. Good taking the Hey Thanks guys. for

spec just specs I think last to you starting briefly, Doug, I question, more inventory noted you the think touched trying on this First but were there. quarter, you strategy, replenish the

company, slight you at I a you perspective you given still construction are you about want are can demand count of are the across back little from But as your spec be, just about activity? where Presumably, comments completed? the spec you bit are or kind strategy think about the a much but have ramping any, you kind you How the don’t of of just highlighted that moderation today. in that talk under well? to kind of remains where levels thinking you that the

Sure. Alan, it’s a great question.

be don’t alarmed. So,

a home want it their build know generally, can on million, their We very very spec, first to at in a company the to We And design think is studio built builder. We and many spec the It’s when is $X design they open one sale client on way. We not XX%, mix XX%, are this and client to build cases, discriminating. important the spec. their even for not order. life. that pick order finishes. It’s go still to our right the in their we

cabinets wants their reason So, kitchen price it’s rarely finished the pick point. spec and their inventory and buyer flooring. at for that their to same countertop The

production, mixing We our balance. and that hot. through so on COVID, our up attention behind XX-XX We so many sold put specs We into got unable so And we fell far we backlog. keep with to homes. were

quoted it’s communities, allocation, but order get so could months. you delivery unsold put long the XX you home, as we call, to decision, start to last on made we some back right communities to then strategic our want am some more homes And times walk of I We very mentioned decision we so those take very build limit sales, at we sorry, because still to your on going types you, had but of in, the tell the and XX-XX mix.

the road might At today. same just So, revenue have time, hurt have down not completed. sale we we it shouldn’t homes the those the because

but in more up. will so homes the we QX And sold. same than we I we thing are started not do we caught And in QX, think

XX%. careful. to be I am business. not If get market close XX%. not the are to more softening, understand we we We sure We shows will signs of the

that case. interested more Through homes the in not COVID, we spec to order. sitting are wasn’t Historically in completed spec market. incentivized than a on were We tough build know inventory

this you build that and home appreciation, but yet. have a are you would in to And drove will that order able know, a If – build out to am held than rode approach we we unusual start longer that order, a the higher XX%, historically price more, industry. think Typically, I spec I that’s cap. back margin higher not to the don’t margin. will but heading saying I into be and we that’s but don’t

beyond We are not so… looking to that, go

slight in is strong prices what absorb strong Got point to the moderation than start impacted more you strong are your seeing demand it. what and at you just takeaway be going so…? bring there, market or in you is homes hasn’t still these And of the as that said my you to of willingness terms aggressiveness that from just demand, you to are to selling, it spite enough in think margins, key homes

little XX% of specs. sold. respect much about a gave a into that XXX our X,XXX much is of think beyond now, your comment little year that annual we you we full than And call range units of are about foundation. at that sales what then have feed X,XXX a with Steve’s will Alan, how or at is We Marty bit to I bit, do stages. less about to have And different how – do. Right asked to

guys, I think exact just about I XXX, think we heard. the number, is

For QX and QX.

and QX, are sales X,XXX homes beyond QX and about at or QX. need deliver to more There spec QX have that XXX we we foundation. in For but are

get are shape. we you very should what is are conservative going that. been continues in we locale pivot market But are starting continue as know we back towards I be every homes, can whether in spec market pivot good should And we building. up. that week mean, to So, always But the Anything not easily we if down. good. it comes would XX% to have very specs. like – we the we start in we when conditions to pivot I are study And being to to are be we on where to that thoughtful

fact just the is the last has the comment that of given the history. you margins today, Doug. your there to comments increases at if Doug, than you today appreciate I of presumably been that’s in are guide the reflection I true am is price there, selling the in obviously, what you similar bit in ‘XX the still And year. just back this the can and several margin that a are mix better market? or in have backlog of up, maybe more, more that the add And quarters the the fourth Alright. I one a margin seeing what that you made be expecting little XX% home curious, or highest you quarter gross Perfect. are company this dialing are that’s

a increase increases. about offsetting we that discussing. I cost do few for last back. continuing quarter last increase months, and seen achieve in have been price per With chatted with XX anticipate per X% It’s than been we Yes. – X% I quarter the not what have questions we the to month price have what more

lumber market a tailwind slow, do pricing us the say I the hard have it’s If offset costs coming down second whether cost increases. ‘XX. will nice least have yet to in does think enough that half down, benefit with power come So, to will of we at we

sit a confidently with last quarters, can’t you it’s like to and the feels Alan, next higher the today, that say, home power I bit a So, certainly will few be but here sold margin. did pricing hard at what I very tell less as

going to will it how demand a am be similar but very moment. think – we I at with plays have out. happy margin, I to see at this how margin are the the just

thoughts guys. the I Alright. sense. appreciate It makes

Take Thanks. care.

question Please Raymond comes from Buck ahead. next go The from James. Horne

morning Good Congrats Thanks. guys. the quarter. Hey. on

erosion I but market Let I market The prices it is XXXX-style me a what your mean a it some from drive that’s of would help kind here to the here kind to take scenario? to housing would from – from home are understand manage is probably of get of to to lot. answer question meltdown. place of terms if impairment or or some what group, does here? one stock land to point? the a difficult similar of What price almost What trying start take the kind cycle with margin anticipating in that the question this portfolio to The kind for get declines cataclysm of in you current downside sort take of have sort

is couple points. as that I our inventory of $X billion guess go a Buck, $X of I there will of earlier, backlogged I billion Yes. did homes. inventory through is

very risk think So, is those. there little with I associated

further are would but not value into we XX as year expect have margins book book those the value our the And appreciation deliver. They the haven’t of in end yet. by We to year, low-XX there then balance about cancellation of seen book next getting We they backlog value talked homes rates. our them. in into them is

about the Secondly, our I also underwriting another gross Those roughly XX% talked to inventory. projected XX% $X.X billion land very margins. good of of about owned that’s feel in those. We

here saw number But choose we proceed that’s with not option big be XX,XXX the this may quarter. are And occasions the the see So, first of and we first price in or second or cost deposits there the deals costs have would to And the growth and plan option again, lots. million not are seeing on the drops, last at we have that significant There deal portfolio. $XXX in our quarter. in – that is as we not control point. to we then in where some to piece a sunk

of of reasons and as work quarter with for wrote first associated so… various deals as off our The $X diligence million of quarter, second part didn’t the exercises, underwriting we cost those those

get approvals. didn’t We

approval. get didn’t We

be It’s up. under It fizzle underwriting. just may that the deals certain

construction land maybe for through, Approvals didn’t and development we seller thought, come the than costs to were wasn’t willing renegotiate. substantial more

impairments. are we not So, worried about

SFR do kind the capital rates appreciate continuing My gears you side obviously question of business. well, you the of capital strong growing I the multifamily partnership the to am rents side with or here, how growing of or do or rental on of as really think JV your optionality I helpful. rental into the there. is rental anticipate color are the to That’s in rise just the investments up of anything single-family wondering, last business, the the go just rental mix side the you related switching the side? about Great. really, to

Yes. We It’s love the business. well. very performing

working opportunities Our is a and with fantastic. with them out us to EQR really at more and joint take The are stabilization. venture for they co-develop then well. partner. is more teams EQR is great us There

money sell committed all for you, earnings. more become As quickly now of be not but are we sell and put that assets to that assets and all we would into can get to see are stabilization as more mentioned, are produce the they it predictable we stabilization, apartment of we more investment having to That because a buildings, we recycled. business have and turning growing, we the more

with a partner We a venture the business. On the SFR like a WallStreet million joint we in side, have substantial investment $XX BB Living. SFR and

some the some of zones, opportunities of a we may BB that. There SFR our assets, some the venture. And where have lower-priced the be Toll that allows venture some do operators. the in sell that That with locations. outside gate out co-invest to to continue that tends will do homes of We us also Brothers smaller to we know deal on doing are other builders carve-outs lot that. I to be

it invest going like selling are of both multifamily. show in SFR everything we business, earnings by The to to traditional stabilization. we are going we So, the at to but continue it, out

guys. Thanks

Thank you.

question-and-answer any our management turn over session. concludes the would for to to conference remarks. like back closing I This

I Thanks, much. care. wonderful Take you you summer. have everyone. thank very a hope Jason,

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

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