Toll Brothers (TOL) 10 Dec 242024 Q4 Earnings call transcript

Good morning, and welcome to the Toll Brothers Fourth Quarter Fiscal Year 2024 Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] The company is planning to end the call at [indiscernible] 30 when the market opens. [Operator Instructions]. is event this note, being recorded. Please now Douglas Yearley, would like to to over conference the CEO. turn I Please go ahead.

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

our events, this inflation to on revenues, about labor release associated better I night usual, of our caution statements. I'm world and As ended the and in affect billion the Please our are assumptions X,XXX homes of earnings our our quarter based on and other future many interest sales our on XXXX. compared of you market, high read significantly generated last performance beyond forward-looking fourth strong units statement $X.X call we XX% statements incredibly website of economy, that on in rates, and housing and financial availability forward-looking could delivered quarter. on a the control results. factors to that very the many note materials, proud in forward-looking XXXX. We understand dollars in a XX% fourth fiscal the home risks company's and up year quarter, with the In with information

X% or beating respectively, ] by Both home of basis diluted margin XX guidance. compared fourth [ million XX.X%, guidance performance and last points SG&A our better of XX%, up or revenues year's per to sales of quarter. and to margin XX was line $X.XX earnings share, our gross X.X% adjusted basis $XXX and Our top contributed than and points

in were in contracts dollars In up units XX% addition, and over the quarter. both

of revenue, per the $XXX,XXX earnings billion of over home adjusted XX.X%, resulting the year, margin generated delivered with $X row equity billion third share net of price we've pretax record and year XX%. We and in beginning of homes returns diluted record of of we generated over on $XX.XX approximately $X.X of an income billion above sales full and income average $XX.X return a For XX,XXX a an a XX.X%. in gross at

revenues X.X% was margin was of expense operating home sales SG&A and our Our XX.X%.

grew we year both community affluent demonstrating to count and addition, results, contracts exceptional buyers. of by In and and are XXX the dollars quarterly our full in our XX% units at XX% financial more by year-end. These the of increased strength brand communities and luxury power and

focusing working. points capital increasing Our lines strategies and price operational widening product geographies, of on efficiency and our our and spec are production,

As achieved XX% I points mortgage XXXXX demand. rates weeks mentioned, in ago, we mid-November. strong from quarter start to finished contracts, and over first quarter have the nearly of have our fourth this units. dollars both we XXX We election of uncertainty year face the mid-September of strong Since by the seen the with basis and increased in up fiscal

of the rates encouraged start season uncertainty the mid-January. right and are of spring and us are the behind selling traffic, direction, we agreements the optimistic for and deposits trending mortgage by With in our election the in

old. market high a and when at buyer to continue first-time age demographics favorable the are in the buyers the accumulated who particular. These in the many their of in boomers years driven Our home baby life all-time retirement. by that in all are homebuyer Toll issues and an and has average long-term and wealth have whom to median reflects positive they country, of home is to higher the of generally by Brothers a median the published wealth age moving of old market and affordability first outlook is homes now National Association primarily the of month, new data XX years include increased. According in Realtors later this Due fundamentals millennials XX well-known for and age the support last of buying incomes

over first-time vast the up of market In into our who Approximately This comprise and in year, addition, move means balance have years. more are significant move over of right and buyers or secure catering XX% XX% buyers financially the to affluent XX is majority trends down just the buyers of and in equity to their the the selling homes. are business in play our level buyers first-time wheelhouse. lowest market move down. These existing is up older the move past

today equity. fact, value of according is Reserve the In to the data, XX% existing of Federal homes

In by our with prices over mortgages locked continues resale limited premium in under driving higher, inventory averaged the half outstanding of has rates premium been primary home this addition, is With competition resale to up be which decades. new X% the year just lowest it the market, persistently high X%.

now less a impossible deal before proposition and of the available of is efficient are remodel homes are median more today's existing compared compelling. to an half new making with require over They features, maintenance, home homes great importantly, appeal over prohibitively well are most architecturally designed buyer. Many old, years to are for built them today's very have expensive are communities to after also homes less XX even value to It the expensive is in of buying to are New with amenities. U.S. resales. new new and existing home more sought built or that most making simply better, XXXX, The part age attractive. ensure energy

loan-to-value In quarter, While with affordability all at cash. we above is of paid in Consistent our mortgage long-term of by XX% fourth the our broad ratio for took over buyers market who remained our our a recognize more average is buyer significantly a that approximately affluent it. buyers approximately impacted and issue, fourth quarters XX%. less XX%. the quarter our recent trend The approximately

the they XX% who put took a down on So our buyers mortgage, for XX%. of average,

in X.X% remained Our the at a percentage fourth as low quarter. cancellation rate backlog of

structural make the averaged emotional to of as low design the sales Our fourth average rate attachment down price. our is buyers as studio form the XX% well base with finishes us options, they homes design studios. In payments personalize lot their $XXX,XXX and premiums quarter, industry cancellation due or they as our the upfront at significant

For high-margin a proportion year, many at that source studios our design their greatest $X also amount for all in cash us. Each provided financial point generational with low of upgrades help revenue buyers high from are ratios, accretive, kids generated to looking spend a of over these great benefiting our and the and billion design on our studios LTV rates we sales the base. our of substantial buyers, payments. as transfer in that down and lot low cancellation metrics strength I'd customer are wealth premiums highlight our the of out parents history

pace XX-XX we ROE, and are pace business the X.X price. of fourth to per September of orders quarter. roughly homes cadence per in rates up with and month. more increase our our build-to-order homes, half sold XX% turning from to in year's back at August we the split Despite sharp of October. Approximately second now of in in of month community ever focused basis, X.X we pay balancing each last and month the the on sales a Turning quarter. With sold a than and between On steady maintained a fourth appropriately XX% spec quarter, inventory occurred of meaningfully from in sales

September October, mortgage by result, response up spike the bit As rates market uncertainty a when we a $XX,XXX. leading the and the and in through average to of election, in net an increases lowered softened price the in modestly incentive

of expected our quarter delivered were first fourth the in This homes, incentives are of slightly our X% many primarily between price, finished be small sales average approximately was quarter. recent result, averages a in our increase which As on of X%. the to and X.X% spec above

increase start market reduce the will spring in the base able improving, decrease we incentives that are we begun and and optimistic to incentives prices with the season With further have of be January. to recently we also

comfortable are community between gross and spec spread our and spec build-to-order We per margin inventory very the homes. our with of homes

overhead. increase the believe to continue strategy margin Our our returns faster We has us and is this spec EPS energy driving ROE operating future. the right into allowed by our grow well leveraging attractive increase to

XX,XXX we optioned. controlled were At land. fiscal which approximately of XX% to Turning year-end, lots, owned or

Excluding the backlog, lots. our our buyers to committed XX% option of represented in land home X,XXX lots

to continue and of including [indiscernible] overall mix, backlog XX% an owned We target XX% longer term. the over

progress made We this in quarter. solid to towards have pleased goal are this

average an standards quarter, are repurchases focus of our our or focused our ROE the helped has deals, and We land underwriting efficiency the in to common purchased years. In capital X land on both bringing on drive approach we existing our approach over assess past year and XX% selective disciplined to per $XXX.XX full land. fourth and all margins new This million buying overall returns. whether $XXX using takedowns $XXX million at of for options under stock, share. our price involve We opportunities they

XXXX, of During X% we fiscal year. repurchased at outstanding of the beginning our the nearly shares

We the XXXX. bought have back company half since now

$XX in the priorities of allocation well also into will capital We our million an important Buybacks and dividends. paid dividends remain part future.

$XXX consistent we it repurchases the flow over share I'll will we to of greater With the fiscal with of back generation. XXXX, cash For another our have million expect which be year, budgeted turn to and end weighted Marty. that,

Thanks, Doug.

full we are mentioned, Doug and results. fourth quarter pleased year our with As very

year records. earnings net revenue, all and Our were income full per share

product billion, homes excuse home share of widening $XXX.X Fiscal $X.XX are in net XX.X% up $X.XX year homes. Fourth strategy, consistent per sales down homes -- ago. ago. multiyear our XX.X% we year or our price and of to to diluted me, approximately These X lines X X,XXX dollars $XXX. homes compared income was $XXX,XXX. supply with XXXX geographies increasing and spec our in diluted [ quarter, points, is and price delivered million million per and from revenues ] average The expanding our of $X.XX fourth X XX.X% year delivered was share results quarter generated and

billion year, in and the of revenues net For full income per share. history diluted our billion. we sales $XX.XX generated year $X.XX homes, home $XX.X Full delivered most was record X,XXX and the

to reminder, million land second sold gains in that $X.XX approximately the income includes net we $XXX parcel As of share or quarter. of a per related a

last backlog year's Excluding roughly $XX.XX. We and to the year-end, quarter. $X units $X.X price of would approximately was XX% net of at fourth X,XXX net homes. this At which signed XX% nearly signed in and gain, or The our $X.X X,XXX been in billion income contracts the stood $X.X average billion quarter dollars. was in billion approximately fourth quarter have flat for million, contracts

cancellation long-term was of in with our consistent backlog average mentioned, as our of quarter, Doug a X.X%. the As fourth percentage rate just X.X%

which primarily to and Our fourth guidance, quarter XX.X% was adjusted points control. gross mix basis was better cost XX margin due than and

we year, X and keep were generally in reduced relative to from our been quarter, inflation costs, cost stability times to which a the greater was primarily recent projected. quarter this of as points We was basis This from cycle by in the X.X% The have flat. SG&A building in impacted costs XX revenue. also compared percentage past essentially leverage year to was of and ago. better building able greater X.X% home revenues benefited outperformance these than years. which flat was we had fixed higher-than-projected guidance to due sales same

efficient, As more results. are become we continue through to our flow the focus seeing benefit on to ways we

mortgage $XX XXXX related XX% $XX and compared $XX.X land sale the in In dollar $XX.X no totaled to There and with ventures write-offs quarter and in quarter were as million in other well was income year cost of sale as Joint X.X% year contributions year-over-year. inflation, both prior to venture, grew in contracts. in venture, other fiscal fourth of land Living double-digit fact, quarter X.X deliveries land write-offs Apartment abandoned QX community joint and XXXX projects. Write-offs million in XXXX. million. Joint million million in sales and and percentage million period. another XXXX, home in in our of compared related the growth of primarily the to our only and count G&A gains quarter $XX $X.X revenues title associated growth the guidance business. spend million included sales fourth income included despite to of from our land the sale versus and fourth QX $X.X

of cash to continued billion generate operations. $X from strong flow We in XXXX cash fiscal flow with approximately

liquidity, invested over We generate $X.X revolving the development. in and bank similar year available billion facility. In our $X.X amount with billion year. ended under and including billion this land year a of expect billion of we We fiscal XXXX, credit cash fiscal $X.X to acquisition $X.X

We to also through $XXX share returned and million shareholders [indiscernible] dividends.

early no capital maturities until XXXX. fiscal and to debt XX% net ratio Our fiscal approximately was at we year-end, significant debt have

Our shape. great sheet is in balance

guidance. Turning to our

X,XXX pattern, of with expected to deliveries quarter of point quarter first deliveries full the and to low projecting X,XXX deliveries be to the half. $XXX,XXX. are homes second with first price seasonal We the average the are $XXX,XXX between fiscal weighted Consistent with normal for an year year,

are For XX,XXX average between full home year and XXXX, XX,XXX homes, deliveries projecting with price between $XXX,XXX. we of $XXX,XXX an new and

the our in year expect be XX.XX% to sales for adjusted margin the first approximately quarter revenues fiscal gross XX.XX%. We to be of of full and home XXXX

into the perspective anomaly much margin fully I increased bit our and We the elect the and spike fourth as expect of the softness rates. gross margin our projected Our and view the point read and and offered inventory be of spec QX wouldn't in mix incentives both for the of primarily an counter in a certainty it. too move impact reflects quarter incentives will mortgage from in to mix adjusted finished it gross to year. from a market resulting QX low

comfortable XX.X% balance and the We full year year. XX.XX% implying the of for our are guide with very of approximately

be fixed our about interest to accelerated be is XX.X%, compensation revenues and our the revenues the of cost in a SG&A cost expect leverage percentage for million to quarter year. sales We the SG&A first $XX sales approximately quarter as approximately the lower home that as remainder in project in full reflecting of of first in revenue be included annual We first tends does first quarter. Also quarter quarter of year. sales recur to X.X% not the of expense lowest home stock

profit the SG&A percentage of consistent be the a in range project XXXX generally of sales we Other unconsolidated as sales X.X%. entities and X.X% home year, gross and full to is to from the revenues For income with expected income, and and land of project in rate quarter million the communities. We apartment tax approximately several includes full respectively. $XX first XX% quarter sale for of and the be and $XXX full to projected first million stabilized the XX.X%, year year

rate related year. granted not the tax quarter do first to benefit that deductions equity our from the for higher we recur of to expect We awards to previously project balance

end average share expected million in full we for assumes million in targeted weighted XXX expect approximately the repurchased XXXX XXX and XX% we to community for the year with currently own million our to year, XXX control, anticipated the quarter is With X% of a year. most on higher occurring count turn fiscal Our Based and first targeting that, or and stock the count aligned communities. later XXX cash by land of This flows. with grow to we it are by $XXX Doug. to common the that I'll for back to be

Thank you, Marty.

position open Brothers for questions, the in I'd focused on to for on customers Most like entire it's continued executing strategies. our our and core thank we up beyond. team it to and importantly, company staying Toll helped the Before XXXX consistently success

questions. I Drew, up for that, it For am truly open let's grateful.

Instructions]. [Operator

The first from question ISI. with comes Kim Stephen Evercore

on all quarter Appreciate strong were order Certainly, results I color. the think all the the in the front.

strong. also Your very ASP was

full than quarter. I well many that the You've guidance little the are expecting we and were for wanted about I and the margin. think though the the for lower as a operating for first year the talked to year full quarter, as about talk others

something just you margin. [indiscernible] to It growth talk kind of seems If sub-XX%. guiding in of you're the cut neighborhood like like about the operating the in and the just

Can sort X of last are Are each years in exogenous control? in XXXX if embedding factors about or basically. any what from, can disruptions the XX% you for if of like out looking the for you done you immigration of us in curious can let's talk assumptions that? Trump's like sense things a mortgage of You've us and policies anticipating for thinking that your what terms give market give you're you a say, your I'm outlook? I'm factors rates. things you're for sense

were in one. rates big that Thanks, have to a modestly. and pleased Stephen. from mortgage down even That's the of to that mid-November, We, rates went question. that was come rates. good industry, high. lot that stay But mid-September bit. as they a parts up either be begun through A will some disappointed stabilize obviously I have or more rates hopeful hopeful They reason we are short-term likely are moderate have to been stubbornly lower the spend think where in and We're

sold either the company. the are buyer quarter that have and fourth We have in as be the all We a we buyers are the just were group. LTV about you our goes stats the they to don't this and proved in in rates we that the said, I where, when talked it success down of somewhat. about elevated, affluent we optimistic come well, to rates makeup will really and will gave cash lower of percentage rates the need quarter. like stay XXXX year last We or But where ratios

a cut quarter. we've traditionally mentioned, in nationwide off tend the as already I the on incentives to And -- the back spring little that increase we price elevated base increase price fourth begun have to a we As season, bit were the price we sheet. open as

with And is combine that we that business in place. so when you -- think reduction we and in plan a incentives,

have optimism next We for year.

As we're eye disruptions, are your Obviously, anticipating keeping to close question disruptions. about on not policy. we a

policy a we by way. of encouraged coming will that are the be our think We new lot

it's as usual. business And so

our our the affluent built geographic this with our succeed of business price mix, type range, market, a in most We product nature and, to are our spec diversity, client. our of importantly,

you color. would that for might And think give XXXX. appreciate time, asked a of could I you had general that range also think Got quarter your XX% longer question I I sustainable you the catch was you at that. XX%, Is a believe operating something about where or operating that mentioned us in -- could you you. sustain you -- I X you maybe you guide is flow if what long-term didn't neighborhood that this I or I think? the still that X.X%. ago And wondering cash it term, margin something be? think margin range is

we flow, we margin. XXXX. we did relates Stephen, range operating comfortable are it in $X approximately XX% And with a as in amount to our cash of XX% project similar to the and billion the XXXX,

with from Lovallo The comes question UBS. next John

off dovetail going I'm here moment. for a to of Steve

you fiscal year-over-year, million cash to the less be back the $XXX the projected did is guys to in With buy intent versus that same the about stock, the flow million why year 'XX? $XXX

I itself, that take in moment in time, time, you But comfortable John, repeats guide, we bought we over $XXX started year we're the But we're to think are year, do of advantage the this generating. million. the not actually this $XXX to it's we prepared look million last and did it. and be there out we But our we and number. History of the Last year we and the as we've may to cash more. flow at proven the in roads year. we're business we're we're buying point we and and at At a going at guide growth that guide. as enter putting opportunity at to what land would

the come the going from the if Yes. for potentially are down That well makes should went? the that sense. with explained Or are the remainder we that higher guess incentives rates would finished does margin, interest same rates million a higher, here? tad that I need actually way and the there guys you that specs gross think at But achieve or I that And quarter. that's $XX.X could things it cadence a of pretty assume to the it then level deliver quarter Is on question about we that at year. through is in you first on that first mix think

not market. It does assume I'll Marty So come improving down. finish. It not will rates assume start, an does

set I to comments, into market think build prepared in not but in do up for to better, the our guidance. it's company we opportunity style you improving an our that

the so we year. And how that's approach

to average quarters the X the last the quarter last set from as margin I assumptions through ]. much good Yes. on that And is cadence, deviation of us deviation without to [ think much without a relates it from

Wolf question comes Research. next The with Trevor from Allinson

question, positive demand want your to commentary. First visit some of I

You on you strong. any rates election, been mentioned has demand that or perhaps you then between that additional weeks X over segments. that provide your now are guys we're traffic the any differences post And different last color seeing pretty absorption paces? Can consumer around

Sure.

time that. quarter look Brothers, you So first back on sales, in fourth quarter than we average, is, about down XX% traditionally, with Toll if trending are the in and terms from of better

are We contracts quarter the month. about community per through halfway per projecting X now

So are do to going the guys for of to the off able math Actually, be if out. it you'll right figure do me it that, now. you

think X,XXX So it's to [indiscernible] it's -- going to range when times ... the community the X,XXX you in

XXX [indiscernible].

minus or [indiscernible] plus communities.

So trends to that traditional QX. there we better have compares how is it. And than of QX

second helpful very lot encouraging. your then That's Okay. and supply. is And question on the

You mentioned lots release you the to having all in XXXX. need grow your

supply the a X-year As we look years. in where on supply lot at from it's down currently it's been your like basis, bit last a seems it few

XXXX, So you question the outlook your for is to under healthy here? from your you accelerate for today, demand you Do given product. have stand as is, need here control still loss the

versus capital No, I'm with proud be Very momentum land taking buying. of option the efficient. place to owned our is more that very happy

it money, it builder Big more with more later. creative with how land, land for and banking. buy we ventures Street Wall up tie other deals We in more pay have friends now, become or joint do

Thank have Greg. backlog is backlog. X max, you, goal net to net X.X Our -- years of of and to owned land

progress. making to going direction. we're there to not in yet, but that we're move And We're continue

So our strong. deal flow is

conservative. deals a very high high get that margin. skinny, miss too We We demand demand okay and we're We with is returns. that. underwriting Our

can structure period we shorter for them to a longer have about very finance deals that a group time. of controlled is creative We owned great keep how

and we're is we the the really very I'm XX% market count this in. community in And can land And company business so with shape. I'm grow X that the comfortable last in proud great years

$XXX,XXX XX point up the our the over XX% point, markets of the have and the these with widened have widened by $X seen additional have great geographies states, in and we've we're that with we're XX in rates buyer the the balance higher to and of how how So and being can opportunity from industry product we of the with therefore move here. first and move affluent price advertisement everything way, time widest one third lines Remember, million, we time with shape. And first our off bumps at with most a the consumer to the some little now grow. And again. we in down, absorb bit sentiment price

And so the and very business about model shape, is in excited great at. we're I'm where

next Mike RBC comes from Dahl with The Capital Markets. question

Actually Chris Kalata for Mike.

you your step a Just this back to quarter. up going incentive saw comments, guys in incentives

you're You're that help settle quantify of just enter year? the incentive of kind down to a expecting price modestly. of expectation Could nationwide to out kind XQ then of load. increase and more you'll new expecting And the out that that your moderate you be then we guys given into as year? moderate I you confidence called rest month X incentive what's absorption trend that able mean, this your and maintain what per to

We Yes. think we're settling range the approaches. season in, to be XX,XXX in the spring as going

price. of X% to X% That's selling

we've Right, we've the been of the already where we I as which a in said, and fall. clawed saw bit increases is back,

it is. So that's where

remainder you just operate plan then correct? level the the at of And Okay. year, for that to

to lower incentives to Well, us are. dictate if I where We'll market think permit continues will to continue market do the incentives the that.

backlog the they go sheet the when forget, see increases. us happier price don't And, prices makes or up. Nothing

ability as also you're down, It's take the the So price have home up. a to of bringing combined you usually incentives a is it impact. the combination

Michael The from next question with comes JPMorgan. Rehaut

that -- point I'm quarter the quarter a get mix difference was of gross incentives. And and I to first Doug, spec first, strategy, fourth level the to whatnot, of about fourth the obviously, highlighted sorry, sorry, to more, in first in the of due higher that that think applied bit combination description you quarter if you there's little due how inventory from rest about to margin bit incentives market spec little away or on your broadly, in the approached couple year volatile, when versus wondering how little maybe a mix much finished is you versus first being continues of a of If you incentives. the would cause the more -- rough let's market of versus you kind the shift the years? perhaps about looseness that your in breakout of to quarter be spec low description more the a I'm had last a in -- you've to the quarter. the say,

margin XX% Mike, the of So about QX mix. is of lower

We out that In year. of out balance a region, of coming more have the we coming less and itself mix Pacific for Mid-Atlantic. have less the QX, the the gets reverses normal and back to of

are and be that you particularly The bit a of incentive bumped QX, what inventory we've that? and get to rates to stabilizing described, September which most behind we we'll that the delivering approaching season. and them. And which other with and we hit our finished through rest spring jumped, the launch mentioned, the is XX% us homes, is as election of ones reversed lot October, buyers or of the we've a sidelines with in move the election that mid-January Marty, want the do to we the closer dropping even seen modestly now as as closer already was rates take with

to are. focused like that's we with change based to returns. on to with take has allowed I'd unlikely do to returns I us think our spec respect iterate think to strategy, the what how And opportunity any I

to particularly combination returns of we dividends high focus to we able margin specs of through softness equity the redeployment continue the which might we've gross on think and occur, have I our capital with on reiterate gross market be and return operating repurchase. what and so margins, been margins, accomplish good don't we to elevated through we'll And mindful now. But as want anticipate right

Yes.

much at explain think in able again, is money. new takes it's with built We which harder a luxury, the were our would today's that same you because would very It I had place. is be a be this company, of business margin much wouldn't market, just what important, because business, spec, be longer ROE strategy expensive. Brothers the fully higher it's turn and now quickly higher margin. a in the smaller that drive driving the communities we we much end Toll of and is [indiscernible] houses, once build-to-order to X to the luxury the build land When building to

It's be So to we It be may at at happy tends that recognize that the with margin. lower point. have margin times bit very below blend a build-to-order spec we incentivized because But are company a more a little we a price capital it's much are it We're more a to together, EPS and bigger you more. great efficient. margin. revenue, more when much put little a bit all still

this And move think, we as that achieving. are mix, we perfect the business we is so for forward,

that Great. well. I as your appreciate perspective

I helpful. think it's

that markets. dynamics trending any where trends, to markets pick also sense just [indiscernible] inventory delve love your quarter. I'm is gone Is Secondly, behind playing the I'd up comments some it you've how maybe the words, start revisit If might is across that's around uncertainty a are just election seen think of rates kind into what how market love better you first a be to your trying and just the to perhaps the away? well? view inventory And understand stabilizing? your of key In in little broader strong of market it other into bit to as drivers the that? there's

Sure.

was the two, have our did buyers, X/X the and in being Those not So the buyers rates. Affluent higher that just came digested us. it's one. one, good equity and X/X equity the house. in significant buyers well the back of issues of investments They're significant client. We rates [indiscernible]? stabilizing they good down, cash because up the economy. maybe equity sidelines tied not three, the market better of by as and houses, it all move pay on trade Number have the being behind equity a move businesses Number their get affordability using that why Number with a coming affluent therefore, jobs. election those the Number down their market ability their and and in up have great good and or to more to out. our bit done that just about talked that accepted in to and earlier, by

stock very We been have market performing a has well. that

Now all with because components, of free up. of started the you'll those That's it many I us had them occurred been of October. why I in think preelection, other well, behind being it that, say, while postelection election place some that in

to prepared is so usually their And the wealth said mom in so so passed we money their kids, I being buy -- and even which and mention, -- they it incredible can their amount didn't our transfer, of home, they dad can home. down from comments, and first

So I think excited is that and for January. we're the driver

of from America. Jadrosich The next with question Bank comes Rafe

of free margin on spec, different have margins? through then you second to drywall talk what second -- quarter Can it's a because in up maybe know whether specs. gross for bit about the Just the sold for following the fourth spec levels different it's quarter. is first you improvement or guidance I you're and finished the just little assuming you

So the of what in the you rest spec assume for first margins and quarter the then year? do for

runs spec about margin margin. XXX basis gross points our below So average the

XX.XX% So we've to year. been guiding for the

above basis because delivering that ] the build-to-order average incentivized a more You in on bit as is about finished do margin. the quarter first we point we spread first a more. little points that little at our is margin [ In is basis math, talked spec X gross XXX that about can bit quarter, and

spread the normal for back remainder And of to the then assuming year? it in the goes normal

is That's assumption. right. That our

I All pockets of strength? differences. either more fourth Or aggressive relative specific then Are price And any is specific into the quarter the there you've where on regional had the -- just and incentive When Can the there the are some are differences? -- you you quarter, where That's the or regional right. side? little bit where And seeing it be first about you've in a you fiscal at talk market look spoken about point? by heading relative Doug, trends? to past, markets think, helpful. fiscal then

Sure.

country. the would still lot that bit because I those D.C. forgotten everybody incredibly and Washington, a is broad-based Dallas We Boston years Houston ran market, about strong. was of Texas. Texas, our in have There [indiscernible] strength markets. is The and far in chatter of was there's affordability out by conversation prices running take Texas and they around COVID. which We're now. and through Those seeing to strength are by away, when a ran that softness markets back. is right some Austin are X driven biggest Austin ran through the

an which caution pressure with the market then a have west, very last other very also little market bit has is seen it is They has the I country's is levels. through strong, up had company good, a COVID affordability bit call in elevated then that Florida. bit where San softer. prices inventory great. And wouldn't more have only small on a Antonio, as been and significant bit. for up. while down been Out And but a higher -- news a more the therefore, so Florida in little it's of there's Phoenix, some of us, are in prices. And there all also outpaced average, one there bit inventories increases the good, certainly price are it [indiscernible] the -- good is a markets And affordability the we excuse that Florida out because The issue there's Jacksonville me,

country. on arriving, so cautionary And just eye most the probably market The that's Florida. as but are beginning an in winter season we're is the snowbirds keeping our

a be before. the simply second. tough comp active because the would product of quite which in luxury relates year our age-restricted to our is Affordable it is best very performer. as then the Luxury As And really type, third comes strong adult not

of market that of quality more today. that lot than doesn't on that good a to because their because cash a and business I the right think they're good lot now, paper, get boomers of in house. there's equity is that's comp year last of it But the paying really but

Alan Ratner next with question Associates. & Zelman from The comes

color few. I a but been got for have answered here, of Most Thanks my the questions far. all so great

work First on if the of supplier might your potential your for Canada, supply risks. base out figure kind tariffs. potential from of Mexico, of I'm there you've avoid try and curious those be to to kind try if to either you guys China, have to done to any what done expand of any exposure chain internal some analysis

a had driven. We Well, we've went analysis, good wasn't a was conversations years. certainly our lot done of chain big suppliers. with through in some way It supply driven. tariff issues we've through availability the COVID that

but to supply So and be have tariffs see. and don't it hit. yet extent and that on de some it's challenges. Overall, I and to wait clear this some the where through we anybody have comfortable will we Toll industry navigate how experience to are when what chain minimis, think exactly Brothers to

closer our U.S., suppliers XX think if moved are moved prepared. A of to I it. last of lot the the lot the the of not a and U.S. years. They're studying they them X to most manufacturing to over

this So see. prepared is personally to and it. but be issue it We're prepared We'll And think wait to I it's going a point. at see. quantify not to try for this big a have don't we're just to

Marty, line on wanted This keep balance quickly one ROE thoughts ROE there, huge might high. to obviously, pretty the focus steps on be touch it's across there for The Doug. but that I to venture on Great. the the just visible. company, taking Appreciate are and joint sheet. the a

there. You've it venture bit it composition investment this city look a of year, I your on of earnings have it's projects have a I back more P&L pretty JVs. the land got has solid And contributor [indiscernible] and wasn't. And the some about been might historically, think, now $X joint know maybe historically, living line been changed, if I the billion traditionally past

you through a what's and little P&L the hoping color going should returns in to So I more investment expect flow just we how the give was bit forward? embedded on could that and see that

Yes.

line couple an includes apartment of our It's period JV the of projects a small. loss during our bit or time gain living buildings. and Generally, investment relatively in a in city show a So stabilized that absorbed development. are sale. It of development in on includes an investment we operating then

hold what So it's lumpy designed JV the to income off builders that's land the then development a call lot to on on And the balance the statement. generate of and each income going through of where statement. bit sheet with gross sheet, at a balance I'm to the cost is land ventures feed margins land higher builders our other breakeven

The from Fargo. ] Reid with comes Wells [ next question Sam

the the be next Center. is Research open. line Is that it Housing to We'll go which questioner in muted Your accidentally? with case, Okay. Barron will Alex

you've I you. wanted mentioned. price Thank about ask Yes. cuts Yes, to the

in price people or a I something $XX,XXX think the of difference would it homes. make that seem doesn't that. buying of I heard I like mean level like big affordability cut your

Is a doing, costs if is the gets wondering it just of more you I'm needle? it like thing the that that? just what's or -- is bit there you guys working, can fence So How any offsetting an something little to of elaborate thing Or emotional on closing that's buy moving are people over say, just on because that? else?

Alex. growth. Is XX% We had working? order question, Great it

They a our to helps in XX% that isn't tough and because market. qualify working cash XX%, up. LTV jumped the they bit what about coming yes, of a up. an of and it. They So like know sidelines with them necessary know buyer know read all market ratio, Is feel have is they but on Those it's a election it it emotional? Absolutely. softer rates stats $XX,XXX

them deal that Sometimes just squeezed of I gives make to a go. bit little is I of necessary I'm out ready feel couple a and a like it got Toll, to bucks them

It's mortgages market lose is qualify think give the extra Now I as much it's how are I why and more It's them our qualify could of still making We you've it It's mortgage drove always and as I driving softening the for by feel very not making the can bit rolls. little yes, the it. gotten rate that absorbing they We're buying -- at rate. This can. we feel down we headlines But nailed emotional all customers at But lower can't market, so challenge buyer very reverse as good. have the we're orders the period quickly a the business away soft. time, and of that it incentive argument. because with sort the XX% a playing because didn't about you if we during price, backlog you around them subjective. up But course, didn't felt that usually great. my money. guys, of we give I

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

thank Drew, you.

were everyone, wonderful, a all support, all holiday offline season. questions here Thanks, any We're again. And have. wonderful answer thank Have you your for You to for may always great. you you your interest.

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

may now You disconnect.