Toll Brothers (TOL) 24 May 232023 Q2 Earnings call transcript

Good morning everyone and welcome to the Toll Brothers Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. The company is planning to end the call at 9.30 when the market opens.

During the Q&A we do ask that you please limit yourselves to one question and one follow-up. is event this note, being recorded. Please time, over to this I would floor the turn to Douglas like At Yearley, CEO. Please go ahead.

Good Thank for Jamie. morning. thank and you, you joining us. Welcome all

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

With Marketing Treasurer. President and Ziegler, of me Officer; and Finance Financial Operating Officer; Senior Marty Relations; VP Senior Rob Chief Wendy Marlett, VP and and Investor today Gregg Chief Parahus, Officer; are Connor, Chief Fred Cooper,

second pleased very with are We results. our quarter

As continued and exceeded second supply mortgage performance in quarter. and began increase our focus operational stabilized our our selling of in that in This confidence our in of the has increasing season improved, third homes improvement through guidance. buyer our has rates on spec demand the combined start resulted the have with January second has demand into and into well strategy our that at efficiency quarter spring quarter

metrics. As a result, we across full year are most raising our guidance

points margin improved XX.X% the than of cycle the record. basis revenues guidance. guidance year’s primarily in homes quarter compared an to $X time to quarter. Deliveries at in to quarter XXX in spec the our improvements mid-point XXXX Adjusted second homes we the $X.X quarter a the of XXX approximately basis increase by of sales We billion was units settled and second generating exceeded number and second delivered home last due better average points XXX price nearly second in each million quarter of gross an

leverage margin on and gross home from fixed costs cost benefited higher greater building revenues. controls from home Our building

last in $XX second expense of year. quarter than QX SG&A was Our the million lower

from approximately more which that are expect even savings. taken we to opportunities reductions become We million year additional permanent to past And over target be efficient. $XX continue cost we of to have benefiting we the

of margin significant we quarter XX% respectively, up generated a beat on of per and $X.XX XX% income year’s our of Both As quarter million second to topline pretax the and compared quarter. second result performance, last improved second $XXX.X share and records. earnings

At stood XXXX billion our second backlog $X.X at and homes. end quarter

cancellation the industry Our backlog second in percentage rate low an as a of was quarter. X.X% of

in They our a buyers as become financially that homes As by average payments make are non-refundable also approximately invested reminder, they they as $XX,XXX. personalize tastes, their invested their And that suited sizable selecting emotionally for current new homes their their selecting home their options in lifestyles, and the to sites, finishes our match the of buyer market. short, typical reflect they profile stick. structural adding is well down

move. to loan paid buyers averaged affordability them which are significant the and value. in makes to them of and from equity homes, those to quarter, approximately all up more XX% our existing mortgage their second a XX% and easier In it have built better cash who buyers concerns Our tend took affluent insulates for

last for second our to $X.X XX% and signed strong compared In net very quarter, XXXX the units year. XX% dollars contracts we quarter in billion, in down second

significantly a previous has were basis, year-over-year to our improved compared quarters. three demand quarter second down on Although contracts the

very quarter. deposits of three of encouraging. pleased that conditions activity, improve traffic, call, As I to have the all weeks first our saw been Physical January. into in mentioned on quarter and web through favorable I'm more our in have we continued and these start report May our demand start last third to the second

have are X% rates stabilized on that and Overall, spike buyers to shock mortgage off to last range. appears buyers The X% in wearing appear to in moving of abrupt be be their the with rates to year's adjusting lives.

of at sale for to housing the population the failing with XX As a starts I in pointed past, with is in out keep there least up U.S. substantial growth, homes the years. shortage for past

-- seeing inventories. historically Now are home with existing rate low which X%, of lock-in market has the mortgages XX% under outstanding a homeowners rate effect. further up low their give to reluctant led tight Existing to is resale of impact the interest me, mortgages, buyers excuse

phenomenon to boon between larger, according take This for are and well-capitalized fact, XX% approximately and opportunities positioned compared builders. efficient advantage builders reports, are historical better become and private recent new compared to sale to smaller XX% of homebuilders who of a of public for currently In homes the norm the has XX%. construction to more especially

With the such levels resale low inventory buyers new market, gravitating to of on are homes.

downs opportunity do, the buy also like buy from they As benefit just they homes. that take resale on not generally they incentives are to not available rate new, advantage of but can

to home when in resale accumulated of addition In this demographics wealth. of the other that with have baby move. and millennials to and incomes boomers and there higher many buying the continue level in of low housing are underproduction homes later country factors support These market. millions the particular, on in are favorable new their they the life Millennials, first inventory, include

cost will that housing demand and staying migration buyers place we in to trends markets, flexibility this supports west, as Migration which believe also driving a high demand general and their in not years increases come. markets. workplace as on from pressures More of south support for housing move these market to emphasis in only have greater trends some alleviate These continue but the to affordability low-cost population power the buyers the are the homes.

heading second in quarter. in second to remained our representing support and demand With of supply of orders homes is focus this strategy strategy approximately throughout expected than to strong, our the part season homes XXXX. quarter our was better XXXX increasing for key Demand in the XX% the off. of spring A spec into of fiscal the spring, half deliveries spec this selling on paying our

a As various a any sell still reminder, in define at construction the buyers personalize stages ground. our home many of with at opportunity foundation least the home their spec specs We we allows to which a with our finishes. of unsold

move when the For even prefer homes, finish brand. appointed we do reflect who we an Toll in, quicker luxury that our those include designer features

also lock this such sense. to Specs a rates mortgage or fill continues limited the at in believe With allow resale strategy that of inventory, contract. buyers make in our to We spec their supply. time market, specs gap significant near

we more foreseeable increased comprise communities. quarter. in of to an XX% and will environment specs base to XX% our future. $XX,XXX and allowed us have price stable home second than has half in of Factoring the average The between by of incentive expect in per continue more increase We increases price approximately for sales the the price reductions, our

chain modest in constraints, easing saw also front supply labor in process. especially the and construction improvements end some We of the our at

As a result, two across we improve saw second on communities approximately times the our during quarter. by weeks our cycle average

the an our in spec cycle our times, combined previous increase of deliveries with stronger production between increase at X,XXX guidance. X,XXX XXX homes, now improvement guidance. on and our We deliver us The a to expect midpoint of approximately to homes increasing led and year demand has full environment focus

billion full homebuilding to are $XXX,XXX between delivery the revenue translates We for our approximately a $X.X of guidance and increasing full to $XXX,XXX. projection for also our year price year. This average

also are from our gross increasing adjusted We full XX.X%. guidance XX% margin year to

mentioned greater earlier, expect from on I leverage we benefit revenues. As to higher cost fixed

selections. and streamlined We option of with are builder also a benefiting from floor portfolio being a plans more efficient

our front, focus the X,XXX of quarter, we On XX% to stakeholders. were in disciplined land and acquisition we owned. At returning our our these well on to XX,XXX capital which controlled land and owned XX% controlled of the fiscal end as buyers to remain capital-efficient already as lots or committed our are Approximately of committed strategy lots, second backlog.

sufficient of XX% significant represents needed deals apply new standards. we we This for land the lots. very into our land underwriting be with more controlled land to our as on these, will Therefore, provides well future. continue rigorous growth selective us Excluding

we years. net $XXX to ratio liquidity In of loan revolving quarter Our financial notes out our strong. second was At term extended million senior debt and quarter, and retired capital facilities credit very and XX.X%. five our end, position the remain

With $XX it common $XX our million to our that, confidence at in dividend. approved a Board stock second increase $XX turn in average quarterly the These our In of and commitment We approximately quarter price also X% shareholders. of and to our the our I'll paid returns the million delivering to in in Marty. over March, purchased dividends reflect business actions year-to-date.

Good everyone. Doug. Thanks, morning,

SG&A, terrific had gross beat As a quarter. earnings. adjusted homebuilding second Doug for and our revenues, guidance mentioned, margin, We we

we And backlog high with and this and the Our remained quarter margins year and deliveries in and $X.X low. fiscal end have XXXX. in XXXX right strong to we of billion place year backlog strategy our homes support X,XXX of gross have fiscal the cancellations throughout embedded is believe second half replenish

of in XXXX. Homebuilding first ago. compared fiscal the year $XXX,XXX, X,XXX XX% billion. to $X.X homes X.X% We down both contracts X,XXX signed quarter X% $X.X to for quarter records, the about one dollars on of mix. revenue quarter second of contracts The This average increasing were in billion to quarter units was second year due signed decline price in delivered the compared approximately net was in and

quarter. average in of mentioned, second Doug home price As raised an we actually $XX,XXX per the

second million quarter $XXX.X Pretax per to quarter fiscal was million compared ago income end. $XXX.X $X.XX of and $X.XX XXXX. million per diluted value book $XX.XX the $XXX.X Net share to one million year or leading at was in a per of share $XXX.X diluted compared income to share

to was was XXX The better second cost on Our in to leverage cost XXXX, quarter was basis higher-than-expected margin revenues. primarily better improvement homebuilding second control and XX.X% quarter a projected. of due than adjusted points fixed gross compared the and XX.X% that

margin from XX.X%. mentioned, As expect adjusted we third In raising XX.X%. XX.X% Doug quarter, year full margin adjusted to gross guidance are we of gross our our

related of year's this of a walkaway During G&A last in XXX to in with quarter of million was QX the the fiscal percentage X.X% our of About year XXXX and related and last improvement this lower. marketing cost write-offs quarter. was predevelopment XX.X% approximately $XX $X SG&A to impairments selling compared $XX second from million. sunk in expense SG&A recent in lower homebuilding the to million million million of than costs and projected. $X that revenues communities. revenue operating quarter, quarter remainder was points second expenses most lower were basis costs was three compared with to $XX and year second of better as

slower delivered are of the remain fiscal with the second increases our being projecting quarters. modest year half be As several half in to XX% relatively expect about of the SG&A full revenues, we would compared represents XXX flat improvement costs and enter year G&A benefit as costs are fiscal Overall, XXXX we second a cost and as point approximately of we selling dollar on our the reductions, over to flat we year, year continue the which basis cost from which previous XXXX we to homebuilding sold guidance. be next from homes prior in a basis advertising to

third be the fiscal year For we of SG&A approximately XXXX, to expect revenue. quarter X.X% of homebuilding

and income sale our million, land guidance. in approximately JV other breakeven quarter line with $X was Second

We our million. guidance $XXX year item for are this at maintaining full

expect be approximately working balance we from the to primarily year-end. other quarter sales to with sell land before the in quarter We projects, million, third fourth are venture apartment income coming several joint and $XX

XX%. slightly XX.X%, credit ratio We billion was facility. equivalents, billion revolving net quarter bank better $XXX than cash $X.X the our in finished million and of in the XX.X%, a guidance debt-to-capital available quarter $X.X and rate under of tax with Our

X/Xth credit notes quarter, During retired senior and extended revolving the years. and bank the and out maturity term $XXX of five we at loan X million facilities

us result, to fiscal flexibility we maturities capital XXXX. to senior and our grow both a provides return financial with position our significant bank business no As debt or shareholders. This have ample until

quarter $X,XXX We between year are million. third average X,XXX of and of fiscal an X,XXX XXXX price projecting deliveries with homes

deliveries to be X,XXX Doug year X,XXX. noted, expect we and full between As

$XXX,XXX between midpoint. also increased average year $XX,XXX at be the price have projected is We $XXX,XXX, guidance delivered above which and our prior full our to

in from quarter to and for be the interest cost to reduced expect the We benefit of approximately leverage. X.X% full sales year in as our third continue we

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

for expect project rate continued approximately the the account We of XX% XX.X% year. XXXX. quarter year growth fiscal third also in We a and for tax community full

for $XX the average be share beginning and is the per million share $XX million weighted $XXX return approaching between count third Based on these factors, we full diluted full for on the Our and expected for earnings quarter. the year all to year, project $XXX.X with XX%. equity

turn it Doug. to me back let Now

Thank you, Marty.

Toll for all questions, their it of open to this thank hard once quarter. again for I our work I'd like up Before employees

key success. Your questions. dedication is commitment let's customers for and up Jamie, continued our to it to our With open that,

[Operator Instructions].

today Our from UBS. first comes ahead from go John with question. Please question Lovallo your

Spencer good you up of alluded pick actually stay with thus if demand here, for up have you activity guys, for but the you expect weeks, any certainly to nice have for industry? morning. is back guys starting Kaufman half-empty on and quarter. John. kind This question at rates would to this, seen X% you and to Hey a of incentive rates the cancellation picked rates glass far sort again over impact and question few for off Apologies the and Thank last but

Spencer, the no. answer is

drop rates any the a bit. up in over little moved not seen weeks We have activity last as few have

back In the weddings of about season before three long company but we're here represent trending down of may COVID wind back and because May from spring the and now we number opening May weeks than better April. that as And down seasonality just begins homes, it's that's fact, down in, May, for graduations right being the off XX%. significantly look generally to XX%. a historically, is historically and goes It's summer if about historic only years, and

back of low so three this is rates fact, In through far, in up to when look we and the XXXX, significantly May over Xs. were fairly May XXXX weeks

activity crystal at that this that to rates so where but far, have at continue for goes. to of pleased I very couple with the level. the market as strong X don't last with the very ball If So we're sit rates weeks, continued

home Okay. able think and been just I you Maybe the you've Yes, that's guys by really pricing actually per quarter. good increase about mentioned encouraging in that on to to hear. $XX,XXX

than to which a a little maybe or Just which bit finding that? ability an curious as right being stubborn markets are more you're bit higher markets that do to And little now?

Sure.

We raise us brightest market. be -- the Atlanta one would don't We price the excuse it's community Florida, around country. Texas, spots by me, The which really on for it all by would well So based is California, second, be activity. Atlanta, doing of raise power country. to and has the Seattle where softest hope markets and that New good still Pennsylvania, But are Those today and Jersey. it's activity strongest. around the we again, be Phoenix improved, seeing we're be. back it would The pricing would not while would

you Okay, good luck. guys got it. and Thank

You are very welcome. Thank you.

from your comes Our next Morgan. Please Michael ahead Rehaut go question from question. J.P. with

and Thanks, results. good morning everyone congrats on the

the about in in margins how that of a of less margins of about talking for gross think about incentives think back second looks quarters? year, back kind of is XXXX, the to puts the like into be influencing you pricing trying is out in next to the as for launching back think but maybe just how few might quarter. any guide guidance of next just question, you've good point the necessarily things next takes not the backlog? the quarter, and way First over And kind and the softer half, the see half playing gross about that to second a And a improved year, something interplay and some little if thinking seen about the it in given than half prior

Sure.

the please XX% those end follow our orders The primarily XX%. year months me. deliveries were the from had this down So are May -- XX%, until and we and Marty, then, last when of coming half nine back year's from of

it, in that it's think did we talked The patience frame commissions bit back talked We incentivize patient, to more. you we've giving range not we as as time had We and had chase discounts that in off. we the, and not to during paid so more know now, was broker we've a we increase $XX,XXX have time, massive trending a did that call But home and bottom, I -- incentivize bit. the and about. right And about, has per incentive down. our $XX,XXX we so to were were

of as the costs, since but So lower that's a dramatic, of which tailwind be all bit helping we forward. move lumber it's that particularly have us we not a will headwind,

incentives, going to now to When board guidance to very not give we're January continue we'll will talked homes four you but as about, XXXX and we concluded have this in months about occurred continues over -- have XXXX, as year the delivering those say me, the trend slower had $XXX, we've of the right And next sales strong ask and four lower week during of except down. it half of that have not tailwind below sales to reduction so months times three reflective since those last just broke months XXXX, the should excuse of on nine feet that a last half in be many more that nice be X,XXX and lumber. Lumber months.

not think So where -- that those I'm good give gives to are. we're going again, we pretty but of flavor a not you details, I

have that, much add Doug. to to don't I

I think that reported these market and emphasize I didn't that. reflective that have of the just some ago would of months we margins chase then just are gross projecting are nine we we that

share repurchase kind growth I makes share If to cadence we That been if you've that. expect believe on balance in me balance and even still I'm the similar, correct just each guidance, balance year, this last $XXX count it and of of if know for not million expect, of secondly, and consistent the of the per I the to just appreciate maybe assumed share one, sense. that to just Right. that's the to if case? reasonable could if originally for repurchase wanted strength had slightly something guess I consistency and pretty the confirm, bigger, years. And shifting it's I the given quarter wanted repurchase given sheet the wrong, quarter activity, sheet strength potentially? the few the sheet, a here number

into for the Mike, a is said share million this repurchases million while Sure. about our around $XXX target we're million year. And quarter, for $XXX real we year. $XXX

generally -- the $XXX we we that the end back to is of April. And here flow cash off had Our remember, better million debt in of pay eyeball year. an in

to more going is usage bit half this cash of and back flow cash be in year. little a the So free

is still million the over quarters. at $XXX which next million, So $XXX two we're

relates it a very to As think I equity on return equity management but that, we're to the get and and beyond capital strategy. allocation don't repurchases going part are of all specific

much. thanks Right, so perfect,

You thank welcome are very Mike, you.

question your Kim next with Stephen from Evercore comes Please Our question. ISI. from ahead go

spend opportunity guys. very thanks to the I lot Very is move cycle hearing their difficult in fronts. it far. I'm But two not if increased way. you're which specs, you're wanted them a seeing that that's down, chatter wondering as And maybe two land respect that and of also and smaller could things free is conference back creating much push we're construction pick comments smaller doing to to seeing in And just your on for how for on or -- then acquire other as could progress. that conditions times we're increasingly narrowing an more land capital something inventory at One for you about secondarily, that forward the thinking of think you're about? so that range generally you've allocation Marty in possibly year and whether and Yeah, intentions, over we whether very or the next look said the CIP encouraging, projects developed. particularly inventory, dollars up we're and builders getting builders your tighter would some is options in eyes, set a credit there, with up we making that, hearing everything

your Marty, released being overall some you CIP benefit could So two from can factors? dollars think you me, that net tell those of whether

one, take that first and I'll you then Marty, the one. take So

Alright.

will returns. the I about think count equally the strategy, flow offset between the cash that from and quick community spec growth in

think I I'd neutral, a Stephen. consider So that

Great.

then M&A, banking absolutely at smaller feeling this hearing describe is at accurate. conference you on pressure everything builders, And their with everything Okay. you're they're relations, land, and you're

weeks, to seeing We and more are by improved couple now we've pipeline lots, that of who sellers are interesting more sellers builders smaller not and because will land their they're can and seen in smaller being builders land feed builders. other profit, faster accelerate. profit land. that who because ready-to-go continue the opportunities There's think that profit becoming in decided and going to presented take have opportunities take builders It's our last of going a I a they're but not will become

can relationships. And they're so they and are more out get pressure because regional with the they to when they're feeling -- going local they're concerned and banking

concept And same also with M&A. same show itself that so that to beginning theory, is local

Again, are story sales, is that recognize good pretty an We years of to potential company this they small good the a have couple put can shows banking they of they're feeling. this to is privates as maybe tell. increase pressures seeing They the deals. a book of to time in good because nice together, M&A sell I the And last margin. try the think

out. just and see yes, where But it that I there's so going we'll action to plays develop it's regard, in And more. think more too, even

do Yes. emerging I very year. that. be this trend into I that's a to think appreciate important year and next really going

just the to Lastly, SG&A on going touch I'm comment.

has put or it now? that should the half dynamic of marketing some year, that agent and costs. I were a of give think commissions how trending be those costs margin. external overall on that going -- us dynamic the bonuses had went your is? down Mike sense we ugly half into could during bonuses to the think and or But agent marketing that marketing how are this back costs, year. already much you in big these gross period of and during that think delivered touched your up that on agent and reasonable to back stuff like I believe maybe if SG&A higher whatever little the back the you And last indicated Is are you

did I agent Stephen, go think during come yet. down definitely the quite up at They time. cost that this haven't point,

think was with, I guidance the of it I and a moderated the we've the see has for think we're goes then. year, we'll the from spend what comfortable and leave it bit end very the at marketing And given there. from market back that where

Alright, worth job. try. guys, Alright, it was a great thanks

Thanks Steve.

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

morning. for taking Hi, good Thanks my question.

You gave the percent about what -- longer the the forward spec How percent of deliveries was you expect going just in much we orders And of strategy can the at quarter? deliveries, then and XX%. term? talk percent spec

Sure.

XX% resale were void. very in of successful here lock-in spec, that spoke in us. in the spec that for my market It's deliveries been are think huge hole We remarks for spec being I mix fills And XX% So due prepared time. left with comfortable of the and some we strategy the that's forward. to moving QX effect is

we with. are And that so is XX% a comfortable number

and under It's specked. managed are various is to not teams familiar open, stages specked not at very about getting with be manage actively construction. for over each Spec and trying that's how very to to target set community the of

Right.

we a So math XX a is easy, example, if community say an that case, sales just may make this as you have, running the in year, and a good okay, spec market. to is if

the choose you out. you that those have then and framing between getting to we cadenced two you four buy forward between three picked one they're so mentioned, earlier studio foundation may as along still at Let's and in close want stage, or spec two lifestyle. customize it further three and a or you I can spec, and we pick we move go your have but and finishes. But that's or one to the foundation the if XX a may framing have count from where And you and then a drywall, be if of finish, three to -- if design quick then year

July. generally and runs spring the April home Remember generally April to from home, resale the used runs through season new January from market the

the time them of this in resale filling that to them beginning or what plays quickly, season, And so it that And the buyers us the resale season. months they opportunity, is have market extend why home so get for gravitate the new an and a want spring right wanted get summer to the spec a hole but there's see how school resell can that to now, we'll where August used historic no you why moving the spring we inventory, homes want market have vacant home thought believe they're year the now so in move hitting we they a market. they because naturally as the they consider that are of school in are available so a for believe we realizing end would of frame. new to it's because shorter if market to the can district, been they out now kids new home new that's resale without good this in may boxes year by the start and new and in into has particularly that I of and continue I there And May

the That's you. then talked some helpful. you're you Thank year, on the really of of when sort up sold to that And just homes half second in earlier delivering market gross about the softer. were how on cadence, the margin was follow comments

incentives because down, and margin you're seeing on For prior that taking seeing quarters from the a still the you gross tailwind are the costs? improvement sequential today, you're you're from are -- orders lower lumber

we December than for those and of homes XX,XXX. gross that of incentives XXXX today price, the in of we definitely So reduction margin is in increase between the were May a an seeing gross are mentioned or better as margin XXXX. sold about And

yes. So the of answer is course, there,

what margins the through premium which modest than sort have spec COVID, a was the that reverted only pre-COVID there margin. of lower headwind I'll margin. that back to call Remember, being the With to-be-built a into to margin, supply. market is home specs to There's was be new a to because in -- it the the because disruption to for labor built taking and premium long was of so price get so anxious build and modestly

others, an We to be as from have the below it and spec you've back margin now, built. reverted heard I to industry, think is where modestly the

call, the our the today I So better in lumber other than in increase that incentives, saw described as reduction communities. and of what minor, of lower pricing we than I'll headwind last more a only market what half costs a to tailwinds in year is

your Barron Alex Our next comes question. from go ahead from Research question Housing Center. with Please

home is yesterday's sales was mostly and it that you. orders starting back Yes, lower In it to growth that showed predominant in report, it come year-over-year houses. the thank priced new in showed

was that if guys segment that? affordable are these or how specs the on they luxury guys you I thinking more you are So focused about curious are starting,

not. Alex, they are

Atlanta, San recent are we've Greenville, the Lake Idaho, four look over They down luxury We the with talking we've tend affordable three Antonio, more But we've City, Hilton the as are the be last Beach, country. lower some Salt spec priced. Tampa, of at entries. building bit initiative been about, you price around and of Myrtle markets course, Charleston, gone Boise, Head, those in if or years, our a to entered new

therefore price by geographically come footprint and certainly has down. our So

because age So point. are XX% luxury what affordable XX% XX% -- of true of more in is call where are not percentage and sales areas, About we we're we is luxury spec targeted. strategy, internally but more that's in expensive build. less price now building our right this XX now because a

there's I of Texas and at Cal more down, higher I of this which making that mix deliberate, in company we you and Denver and cadenced But the not the price and and the areas can through for prices, the spec. very mean in sort the thoughtful. not strategy of does to markets the spec before so of us Cal now how is some Southern confident in took even in strategy are And out. are the specs very more come because spec. on go going on, We're be Northern in demand we're building obviously, has lower

it's But to more now have is to lower strategy of XX ago. So naturally stages X construction, there are a mix, targeted because different bit the years would it but of than our spec nationwide.

stats mix that based. XX% Doug, luxury affordable on he follow are to from gave of comment Just the units

were dollar adult. XX% and luxury and XX% active do would based, to be you it a affordable XX% If luxury

between dollars, and percentage between points units luxury So and swing affordable XX luxury.

a he I'm is guy. a dollars. I talks as guy, Marty talk So finance and units, marketing he should,

the opportunities Got builders it, that's thought selling comment very very interesting. opening M&A I helpful, private that on And guys. up and then seem land that your

would based, is more more consider is builders, large a you increasing size opportunity if potential market, you is what So like about existing you more what to criteria, would potential there? new be entering guys with were an guys it way geography some think M&A or market, of the for the the it private a or M&A

footprint. happy the really geographic with We're

I markets. we one We'll to more that's a of that builder becomes of big to So it's our that likely which too be M&A not see have in builder big using or deals how said, pay an not that be a market. careful the land to a bigger, because have we existing have as means to not make it's but goes a enter deal flow. it that more we're think there say a that wouldn't yet, organization, of just it I those a premium new in route, brand, more But likely not we diverse market interest have to in us would

deal and two, we're a you or and we we'll of stay certainly, on we stages nothing deliveries So we'll in we'll that report of have the know, anything. would noticed focused negotiation we're so the the month just no activity some and last in that But now, certainly see. aware there's not XXXX were that. -- or But deal flow help tuned, is do over that there If there's is just final to picking to right with up. on so

certainly us one relates And in pieces to that that are take it much is that eyesight's to in may that as Yeah. that choose those deals it of attractive. deliveries builders market they kind our the XXXX off to can drive more for sell, of land

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

profile buyers in I'd you of to just about some really couple credit Good quarter. guys. disclosures love Congratulations. your on of and on first Doug, Hey, about relocation. early drill a Really, gave then great morning. commentary

percentage mentioned from that you do and been how from down XX% trend your across last look think as of buyers excuse or years Do then that payment and moving on parents, of over LTV side, track XX%. what track several lines assistance relocation the the you that of you well tracking kind second are payment the your state does loans family, on and And First, recently? metric has like late? more the on I side, is your down me, average

your As we to to And that's hard the latter, don't. get arms very around. no,

is a a it for sure. factor is Absolutely it Anecdotally, factor. factor. positive a But

give I passing Look was I when who boomers, transfer I my with and old and their -- my but years I father growing, me right. form give dad out. demographics wealth mortgage, wealth was helping remember at that's down. my starting my of million just are to me mean, the cosigned is money, be didn't the job didn't mean thankfully, first another XX boomers I which, XX parents going my

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in Very data helpful. lot A of there. great

you. thank So

build question had, I to other spec, just back order. to The going the

designs, I specs on margins a options between So a headwind of on margin would was getting spread the to would thought little as only given surprised order, and for that build upgrades greater a you you and be I small guys, spec generate because you you're since that have much that and product a referenced gross not that.

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yesterday. XX More than ago. months

Right.

difference timing So there's a big there.

that showing Alan… what right now, So, we're is

spread that? it Marty, points apples to homes spec would that like today you basis so that apples if versus be to nuance, it So greater on comparing were sold sounds today, the XXX than given clarify and timing that BTO,

Speakers] [Multiple

XXX points. basis

Got it.

Okay, thank you.

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so margin. And there's that --

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they built have So we some what naturally picked. have into margin

lot Alan, deliveries our remember, XX% And deliveries for $XXX,XXX. specs. were option this those were the includes of which premiums, upgrades quarter, a

Appreciate Got it. lot. Really great info, guys. Thanks it. a

you. Thank welcome. very You're

your next our question question. Please Dahl comes RBC from Mike from Market. And with Capital ahead go

my taking questions. for thanks Hi,

inclusive help here. base is can of of XXK, all on the us gross the follow Back that couple kind of number, that XXK of the is base back incentives what of is in is net just increases? rolling incentives? it a Just understand And of it kind price price you versus increases split terms a on if ups true in, price

net. So, Mike, it's

front I amount was the in last So and it's the combination can price because the raising it backwards. the sheet up, this it's price of love goes Incentive in week's course, drops cautious, is sheet But And depends probably you Incentive of not week. told say incentives. half this have half is of me may half. we're demand. It this say, that price taking probably week's of once it's is half and and We sheet upon the because would XX,XXX price increases put just a that softer. next net. the is I boss And community just think price, buyer I and new incentives. and increases number, price price. next But more that

Okay, question, thematic right obviously now. the kind home, My second in sense. huge existing idea it's makes Doug, of an tightness of the a

that a demand. buyer that an existing already You primarily has strong you're a house and serves are guys seeing builder

up choice and seeing communities. seeing in, every you're kind their your buyers probably or are low still giving to to higher mortgages. moved and So opt the right is homes leave rate but trade making of definition, buyers who's Consensus everyone's into these homes your existing by builder now come up

of maybe buyer little but be a you of wanting You that just is what can -- targeted, you're different up in better guys true of if also age the may cash your tightness why given in and the articulate bit bit to terms seeing not the kind to you a in of about little think existing home strength some terms is people give what decision that rates? you're demand those driving

Sure.

number a at of work that factors got You here. are

that population play. and demand homes of XX forget in years not Let's imbalance is growth serious between built

have buyers Our homes. equity in their

of a In X% X.X%, rate, selling price because above market, there. these at a with fact, even lot asking a or out homes tight at nothing are resale there's

a wealthier. than they They're success town. when They they're that kind in to of sell there their in want importantly, home. They to district. the their what they're more with more life. rate still even better up school you have do. So, the environment. at But life. would going want confident They're They up equity They kids most has move really normally that house, think had do want to there's buyer prestigious out the to We're we want good move bigger Toll move buyers want Brothers, frankly. the this

plus Our minus build We communities year. a are or houses special. really XX,XXX

it there gone This on and it's lot because but have yes, time be is up, in is want finances and a was what are there's up, decision. family is because out results a great to it affordability rates we're are have People enough, an we're This And higher, and decision. offering lifestyle issue, rates it, seeing to aspire this a Does financial And see expensive not more move it. so, to buyers But play we're it. long and offering. into it move our communities with though still our even that's life. they a there waited that decision of that of their course does. of is than

Thanks, Mike.

we'll gentlemen, time, management floor to ladies any remarks. and back over And closing at the for turn this

wonderful, see you appreciate Thank interest we Thanks, summer you, your great a all and care. and And wonderful soon. support. questions your we and the hope We everyone. will have you Jamie. Take

presentation. joining. that, you ladies thank and And today's call We and for with gentlemen, conference conclude we'll

your disconnect now lines. may You