KB Home (KBH) 21 Jun 232023 Q2 Earnings call transcript

Good afternoon. My name is John, and I'll be your conference operator today. I would like to welcome everyone to the KB Home 2023 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the company's opening remarks, we will open the lines for questions. being company's will XX. website, is replay available call the at kbhome.com conference recorded be and for Today's through July

now, Investor turn Peters, to I'd over And Jill to the Senior Thank Relations. call President, you, Jill. Vice like

begin. may You

afternoon, for Thank results you for review second quarter of and joining you, everyone, thank today us John. to Good the our fiscal XXXX.

Vice President Jeff are Mezger, Bill Vice Executive Vice Chief McGibney, Thad Executive Chief Kaminski, Officer; Chairman, Officer; Officer; Johnson, Treasurer. Operating Vice and On President President Jeff Hollinger, Chief the President and Accounting call Financial and Senior Executive and Officer; and Rob Senior President Chief and

Act and and call, could stated press in the any statements to are of filings forward-looking will items results with update that in discussed detailed not statements guarantees forward-looking or this of them. meaning today's are the Securities undertake Private within the Commission, not Due those to future in company does from statements. those considered our including Reform XXXX. During the materially of different factors, and obligation Exchange actual These release implied be Litigation various the be results Securities

the the be margin, found of referenced in today's charges can reconciliation Relations of a release gross discussion of measure Investor to on profit page at today's during kbhome.com. addition, In any other housing comparable directly which measure GAAP adjusted related inventory our measure excludes non-GAAP and non-GAAP its website and/or most press

that, here is with Jeff And Mezger.

orders. sequential improvement our We strong net in significant quarter, good second including everyone. afternoon, you, our a and delivered Jill, Thank in results

benefit and new all which of new build executed quarters well, divisions improved Our the in communities, reduced cycle times, opened us ahead. costs on further starts, their will

earnings guidance the details diluted March provided $X.X in we total the high we for of billion revenues the share and of per of of with As end $X.XX. exceeded results, our

improved quarter. the homebuilding of operating reflected with XXX and This continues cumulative by during homes our and our implied delivery along and build than fewer stability a $XX.XX, guidance year-over-year. of expense charges of our healthy X,XXX and better A closed XX%, This ratio cancellations to margin per performance provide driven several over a value was XX.X%, inventory deliveries times, XX%. our quarters to backlog about benefit by drove SG&A revenues inventory. higher XX% with share Our unsold homes, income margin solid below share of excluding related conversion gross up book the repurchases

remains availability we by Market The inventory low demographics long homes well particularly segments. first up and as business, primarily first our characterized are and price the at serve given home affordable that points market healthy. time term dynamics housing as move are outlook that existing for the limited for of favorable new our

mortgage the With is positive continuation demand, respect higher the buyers factor. to a rate environment adjusting of rates and a are more stable

In urgency addition, higher with starting year. saw buyers than of now that is a and we earlier price market inventory demonstrating are I lack increase, sense mentioned the to this of resell

which we in our call, a to quarter have demand discussed sequential first we As begun improvement continued our quarter. in February, on see second throughout

cancellation we our year-over-year gross above is of back a significantly increase historical As a rate reflecting and in net levels. result, generated guidance, orders X,XXX, our moderate a orders toward that

historical per our community average per month, with is basis, quarter driven volatility. On prior to averaged orders absorption second pace the our a consistent X.X pandemic which net

pace four orders in optimizing goal strategic of asset, monthly Our to inventory turns. and net absorption five continues a per each community and generally between generating which be results high

and the and then selling our sequential fourth our quarter season, second a spring with typically third peak quarters. decline experience in We a in see absorption coinciding in

the considering we do recognize guidance when increase. to provide soft comparison third interest usually rates year's not orders, rapid started net on have is last the we in While investors it quarter helpful

Demand strong move be while orders. in influenced and of we orders project X,XXX our interest and rates, an in quarter or could XXXX either resale net a third in increase June in range levels has X,XXX inventory between remained direction net by

business Our that for growth their markets geographic spans potential. were long-term selected

With in written moved from the Much and has about out and ongoing it in provided has more of call which perception years was the the footprint homes been our few on a March, by investor just our we in today point view. California our Southeast ago. years our market expansion the this than discussed diversification of is over region, earnings building balanced favor state of

our to facts sharing want we the opportunity moment here. spend thoughts some I and a with see about you

peg While source, firms the relative shortfall some living the existing in the at numbers X on more XX production housing differ million than million policy of California people homes. public to depending

year equilibrium achieve the to let a environment, deficit, homes overcome regulatory the not reasons, and For number are alone of is and between demand. a state enough new challenging including severely each there built supply under-supplied

addition most markets. higher approximately our to before California's is with than of been XXXX, shortage, In housing stock built having this aging XX%

highly is California. a job market I income above-average opportunity referenced to factors longer-term, from and to attractive report Moody's According growth recent just which the together that projected Analytics, the in state point to with have a

coastal work-from-home markets become most of while business as affordable from the of our million balanced our trends Within rotated plus affordability, are points divisions has communities. our benefiting across with out better now served $X our price we price and our more have Inland state,

we and provide opportunity are which our while diversification and growth. region, of profitable environment to our regional Boise, well standpoint, are augmented sizable believe West now to teams complex long-tenured and our We by identifying and our Coast versed also acquiring meets California Seattle running have navigating the We further West business in is a across our in in also our the well requirements, the From operations that expand operating land scale continuing positioned leverage remainder in that businesses. capture and footprint. regulatory return

the nearly large approximately our in from and $X.X at saw past see stability backlog valued of X,XXX a our past stood work marks the billion. deliveries model, that visibility end provides, Our the backlog during the in second we This backlog times our as in sequential at built-to-order growth of homes the value first the year. quarter at in in conditions we challenging year. particularly market backlog and With

than times, more With to deliveries will speak convert the our our in we improvement over we've able in backlog the to which seen expect past years. build to a the two Rob in to moment, quickly future be

are ended our build-to-order targeted X,XXX During X,XXX with homes. and in over consistent split more the started quarter homes than of which sold, homes, inventory with aligning of quarter, starts we and orders XX% with the net our production,

to are we expect the additional third ramp our our quarter. prioritize model, given We we And up homes inventory while market to with supply. and starts built-to-order supplementing conditions a our of in starts lack continue

operational for moment provide me Rob Rob? an update. that, With ask pause and a to let

Thank on on you, some direct times with update. costs, Jeff. followed the by I'll and chain our start that supply results we've a order net made color discuss and build progress then

the balancing began each We As of second Jeff strengthening quarter asset mentioned continued February. on pace, that by in earlier, on community-by-community month the optimizing our in month basis, orders a sequential and our trend price focus margin. net

delivered. adjust as lower steps XXXX, position our in That we on more XXXX pricing we and which trend community stimulate as early locations two-three deliveries, to began expect to pricing in and improved normalize, of able were The when took of and and prices to second markets market our backlogs our current of to reversed raise in in we communities. quarter most XXXX, benefit large to demand converted we were late to see early based sales are to homes we In about conditions. a these in

representing with a was handful remained of communities. flat the latter And pricing only one-third, the other yield or lowered

selectively We when to continued buydowns buyer qualify, fewer in which the a than such in to leads use year. rate communities earlier occurred as

a we XX times, drove of over improvement significant from home quarter sequential to build to a completion. with second the in slab start days As reduction

At solid between months returning progress levels. and above our division, of still four those in the but level on times to we are historical running roughly our months, making are months seven five depending construction

In addition homes. selling efforts build personalized the also work help should progress, cash cost up times in amount have our in to on our of our tied reducing our in we faster

time choices and CDO supply well better ongoing and chain labor our availability, driven offerings, trade options. product was improvement as as normalizing designed, construction our structural by a initiatives The to simplify

the have to over customers our partners, to by our reduced the our that the by These most We efficiencies available cost for teams, have chain. selected time options studio trade changes supply customers, readily build. XX% SKUs lower while helping past frequently and our months, our and are in and those retaining XX created our most

approximately down XXXX. that our last in on We costs started shared peak call with from on direct March were homes in August the you $XX,XXX

starts. switchgear this availability to chain, several quarter, normalize. During electrical area heating with to and reduction equipment, roughly with product transformers, an including on remain in in markets the continue additional second products and insulation times conditioning new the long while as of Specific such supply in some and short we air lead continues supply progress make $X,XXX overall products, to the

contributing the times. With course compression our respect in trade relationships have developed the In becoming it more available to our partners, markets, of to long-term build many we is labor, consistency is over most attractive starts valleys trade with our and peaks of inherent built-to-order of value speculative of model. flow to model decades. even who The business production multiple in opposed our the contractors our a as to

cycle look forward, and chain to and leveraging to normalizing future we help improved continue time, drive plan the volume supply As margins. costs we lower

over And with call back turn will that, to Jeff. I the

Thanks, Rob.

XX% credit venture, XX% customers have through joint and and financed the funded about conventional were mortgage Home our XX% About fixed strong the buyers use rate onto mortgage during the KBHS to roughly JV profiles. these continue products. Moving quarter mortgages KBHS utilize Loans, our of of

quarter to $XX,XXX. income The income buyers equating their in was household payment above $XXX,XXX, our score household the median was of the at average held cash first average XX%, FICO over The and these with down submarkets XXX. steady roughly

make targeted can with payment. rates healthy attract credit, to We at our significant buyers income down continue qualify levels mortgage higher who above and a

quarter, approach the investment, we our million land During to to spending land. cautious new $XX acquire maintained

are our land While respect for deals, to required our our disciplined diligently underwriting returns. looking achieving being divisions we're with in

activity half selective our flexibility remain lot have acquisition our to With we given sheet. improving, accelerate demand the balance expect land of during and to second current XXXX. healthy We the position

that continue quarter. invested fees already second We land develop during own, development and in to $XXX related we as we the actively million

land of part our of we reduce closing purchase lines. prices extend continuous time a land are As renegotiating some review portfolio, to and contracts

also buying now are sellers often get on with we reengaging that to better had previously abandoned, able we pricing. or are better certain We deals terms

is continue which under level. consistent with at XX,XXX or representing of lots XX,XXX inventory stands over just to years position lower development finished owned, lots adjusting owned focused to controlled, approximately starts are smaller basis on with lot manage phases on supply, historical phasing of balancing lots. just with our time we our our Our develop outlay, Generally, three which phase a cash our

lots our given delivery level are achieve We or the We as we growth currently of increased returned from next cash targets well shareholders own to capital quarter, couple again we control our that years. operations. positioned that the of amount the generated we the strong need of to the during over

totaled of our repurchase X% $XX million Our shares nearly for outstanding.

and accretive equity. past the returning and price including an to dividend. of XX% average our months, value repurchased on quarterly return earnings The our now about at XX been shareholders, million our $XXX approximately shares enhanced our to have outstanding per Over share repurchases $XX.XX, of book have we

we ahead, in in allocation, our to returning business capital will our shareholders. balanced Looking cash reinvesting remain and

customers drove KB which I our our entire In the in closing, team to quarter. thank our company, Home and the their second to for strong want results commitment

that the the and While us navigating year, there with model to to of allow respect uncertainties conditions. market our economy remain sheet we have are will second half a still business flexible fiscal in in balance

now We the midpoint of positioned for composition approximately We on achieve and our progress a revenue continuing of about the of of guidance our gross year. backlog. the based look business are margin update you in forward and on this XXXX to to well at to higher size XX.X% later billion our $X

I'll With Jeff over turn the financial now that, for call to Jeff? the review.

afternoon, produced the improving quarter steadily outlook our that everyone. cover good our key Thank Amid our of year. second and for expectations the guidance results provide full and you, quarter conditions throughout financial across metrics. exceeded second market and now highlights will all execution XXXX performance quarter, solid third housing current I and our Jeff, financial

credit and shares strong common stock facility. outstanding eliminate additional our In operating us addition, cash our borrowings repurchase under allowed flow to revolving X.X an of our million

housing a for number year average by offset in increase billion in revenues quarter partially rose of homes X% price. a $X.XX decline Our of billion X% for reflecting prior delivered, the from the overall $X.XX period, selling an the

construction and third cycle in range on current be we backlog, of Based times the to revenues housing billion our $X.XX XXXX anticipate will our $X.X quarter billion.

For our billion to of full the range increasing build to housing our well and are construction $X.X believe continued housing the current backlog, we forecast billion. top to ending status expected on based We conditions line are our quarter times. year, we second full in $X.X anticipated this revenues improvement in of achieve positioned homes market year

regions. the mainly business of this Coast by the our shift prior delivered to quarter, a which highest four decline second homes million of average XXXX XX% Southern in mix as region $X overall first the our in region, of increases a three our our quarter, $XXX,XXX $XXX,XXX X% with West period, delivered of price result communities in across was, of California In from in plus XXXX. offset where in to regions the several The X% prices the out selling decreased ASP decrease selling were our community has year in as

approximately we will For increase We to believe for projecting a sequential an fourth West our the selling mix third are a $XXX,XXX, expect average price region. year overall higher price selling to from full Coast and the the due quarter in our decline quarter, XXXX deliveries of in the be average $XXX,XXX. still approximately

to in year million $X.X year of a compared $X.X the quarter was million million current The charges Homebuilding million as operating $XXX.X quarter current included quarter. earlier $XXX.X abandonment the in income versus ago.

Excluding charges, the operating points XX.X% current XXX year-over-year. our inventory-related for margin quarter decreased basis

income a quarter impact be inventory-related the XXXX of our expect in to margin, XX.X%. X.X% range third operating We charges any homebuilding excluding of to

XX%. we expect any full margin, charges, to the inventory-related about year, operating For excluding our be

quarter XX.X% quarter. earlier housing profit compared margin gross XXXX Our to XX.X% was second year the as in

other our gross by costs in charges XXX of a points by related and basis mainly inventory periods, concessions, with was to together homebuyer in driven year-over-year homes and construction Excluding mix XX.X%. delivered. The the both margin increased decreases decreased shift decline price

housing Assuming quarter related of XX.X% gross we charges, to forecasting XXXX are range margin full approximately no a XX.X% inventory and third margin profit of XX.X%. year the a in

for our quarter. from second mainly reflected We Our XXXX selling, approximately general and from XX.X% quarter. improved administrative the current slight for the XXXX year to XXXX expense quarter ratio will ratio believe in The of X.X% revenues improvement SG&A be third X.X% our about leverage XX.X% expense higher the full be and operating quarter ratio will XX.X%.

produced Our expense federal percentage X effective year represented compared favorable credits of the our an expect million of XX% for point prior impacts the tax current the second of due second per XX% to rate net quarter for of for in to Overall, we share million, $XX.X be quarter diluted million, XXXX improvement $X.XX to energy rate We The now income for XX%. $XXX.X prior tax period. was $X.XX the share tax tax quarter. for diluted full effective year period. the to income compared or per or as as $XXX.X quarter the year the approximately third well the

now community to Turning count.

count sellouts average sequential for relatively of to average Our increased openings of up solid with XXX trends XX% XX decline a to year-over-year remaining higher communities, our and second ended approximately in the quarter communities sell. community continued earlier count, of our homes be and a end the low XX% due reflecting expected sellouts We number XXX from with community quarter. the reflecting a to order quarter proportion period. XX anticipate that quarter with quarter during third year increased We

of average under the lots year-over-year full flat pipeline quarter up the the and million be $XXX nearly year-end and to XX% prior to compared as with we count quarter about community to the expect in or openings, the during a second new development XX,XXX approximately continued year and year. owned land be drive invested We contract. To ended

the liquidity approximately cash total revolving of of $X.X million land our a land borrowings and cash. outstanding In the At total with $X.X in development, facility no our invested over development. land end, was XX% available which million of including $XXX first nearly under and capacity we billion, half with billion quarter unsecured $XXX of XXXX credit

common the million the our of of general we and opportunities During market environments. which shares $XX.XX, pace, repurchased common cash an value of per timing to X% outlook, the at in continue based our shares book repurchase price to quarter, our million stock authorization, average approximately investment the land on below and shares and intend over under our housing flow, price X.X stock with needs, considerations With volume share. is current quarter our economic remaining $XXX repurchase of liquidity we market operating end

per performance several Our reflecting quarter was billion stock was year-over-year $XX.XX, stockholders' up coupled to past $X.X repurchases XX% common quarters. book value end and our equity financial the over share our with

our conclusion, In and financial very the of second outlook our execution, performance strong key solid remainder pleased operational enhanced are year. financial factors we supporting with quarter for the

Given time are further foundation we about to solid in our improved conditions, a favorable XXXX. forecast year cycle trends and improvements XXXX full finish and both market for on housing in optimistic expect

Please questions. We lines. take the will now open your

John Thank question. first Thank Instructions] Lovallo from UBS. question-and-answer you. session. our you, proceed conducting with time, [Operator question be sir. Please And the this with we'll a comes line At of your

and questions. guys, you thank afternoon, my for taking Good

of the drive could mix. it what the margin as ranges, But see end on down timing The and range factors function a on and like for like sequentially. of those seems the It is you higher of a wide and curious fairly may The sequentially first gross of both part please? just seems maybe be both outlook lower margin third quarter that one the operating. down and sort

Yeah. Sure.

second. year a raised XX year midpoint the just our to by for -- this basis for points full the full versus quarter. starting Let's quarter guidance We've midpoint last with

last full optimistic a the quarter. more quite obviously, pull a year nice are were forward of on and number. we we and margins we the mix deliveries second second So quarter, leverage saw did into quarter the have the in in shift than We the impact

second the actually So due in beat lot of upside leverage quarter the lot and higher actually the from the is to of deliveries. the a a

that expect quarter's So year margin around the are XX% range of little the We a bit margins progression first a sold. during is reflecting last I expecting. units we the with lot half talked the for the similar very half and those we and almost bit our lower in in would the overall, year varying really half to second relatively full about what up second half. little a the back that time still consistent say, call when in were gross is were a of And right

ticking market to all So -- margin cetera., dislocation if of increase in and expect year to the the that half little that those be in the you'll beginning point, quarter you look started, see in you'll the and said, a and quarter the trough margin down quarter we'd along But went third with the cost this second modestly. pricing, were that see fourth through that and back last when see at to uptick bit. et homes the starting fourth third

much were by maybe just what you take the the helpful. of well order please? communities lower And I of where markets that setup kind in price it be, next here. ballpark, would what in markets us like guys like? to That's the price pretty into lowered were prices, increase sounds two-thirds did how of able And guess up, help is But you you good look and XXXX magnitude prices, those where the question as then,

Rob, that? you take want to

Jeff. Sure,

to We community, and weakening backlog little we that with a ongoing one in levels bit. were and that QX as of chunk then lifting price, throughout asset, those especially early They just had in adjusted up high pace up down late continued 'XX delivered pace pricing we second the improved, those And of worked. find per before and changes backing you minimum back communities to the the a of to of get started and the our and market week strengthening is large on each and we market we per into which 'XX effective. in So shared out optimize QX part and picking February carrying quarter. our of our were strategy

of first that have have it little that I'm a didn't price less a the about the then spread QX, average not on your And the implemented divisions our lift prepared XX% increases part So question, there we didn't balance, were based our less mentioned hit they price in where was $XX,XXX. the in across increases on we was mean, I I XX% of the out price. and across in decrease. country. really communities pricing, that footprint. than amount we some over was sure were. the broad remarks the if on the of It And And exactly what increase than received any

was I the XX%, flat change. pricing think $X,XXX. it remainder no it other then was around with of the And those,

from And comes line Dahl you. Markets. proceed question. Capital Mike the with Please next of your with question Thank RBC the

Hi. Thanks questions. my for taking

when orders count you're about guide, strong it the It to start the think at Just the that demand your pretty guidance pace. like saying, and community look doesn't into June it's I still seems on I imply environment.

sequentially, slipped seasonality. still it's better normal it While than

little how up just of what you you've relative color on season expect? specifically maybe that spring you'd So shape to kind you've you're exited seen could seeing add the as and normally what more a selling

-- John I'm Mike. sorry,

buyers there strong the our for prepared just remained I pay that really, in see a system, premium inventory resale there the that's to in so them. the little shared what for out across to compared lot as new there available third desirable because it's As we comments, on resale pushing the And quarter. here is my side isn't demand has

our down quarter. mentioned this cyclicality to have I in so a And drop the normal pace typically and that see we sales third we

as it's we're guide, is a we And there inventory And right decline look would. back projecting there. tied as significant typically out not if no to, at you the

right the a we're leads based month and what are So, stay they community over still four -- conditions rates where a if still per community. that's to we count continue it’s about that's see that market seeing guide now on that us little to

pleased consumer is So the in we're with pretty responding right the way conditions. now these

distressed Thanks. been that Jeff, second have out looking on the puts question, takes quickly, publics comments to some the land the probably It capitalized emerged of as some really there the my is coming that And in markets Okay. haven't just get of pretty this opportunities around cycle, seems land many investment. and like that now are starts helps. land That rebounded are maybe all people pretty well ramping, game. back are is

is some competitors there's flip The little some the banking a fallout, given side will -- private some more bit be is maybe of that your there sidelined. optimism probably

either you competitive give So seeing you terms color What little could us in are otherwise some starting Where staying while you're or of back just disciplined? of acquisition this you that as a on successes still see? land ramp dynamics? examples more to your geographic look to some up are

can is figure out And again in them really pace numbers improving as softening in lot to and demand capitulate. of and of a very markets, large, underwrite a make I were a with In landowners but topics the patient there's are ways and most in share pricing on to would you can Well, that touched didn't you of our well-capitalized the a you response work. tight, that. lot through in they you now demand a submarket,

or the they now have we're back and that as they sat now and them again. where we're with certainty smaller We with close have pricing it may a we been getting well of aren't while successful have just and capitalized engaged terms on abandonment of and some sellers better better for

never team in looking. would QX good and there. I builder don't that's We're a competitive. better it's city, have maybe out to we think today had. market our But So, a in stopped are to QX the you're that share out others. our it's And so as on good balance. teams activity. and of you all as We in pursuing I a any pretty a aggressive we'll or is typical there know, balanced in if pretty -- the than we be weren't And deals land, only I aware chasing land to network color not continue think be of want Rob, They any worse something. or be can't work

No.

it there, Jeff. You got

I right. that's think

question of you. Alan our the proceed Thank And Associates. next with with question. line Zelman from and comes Ratner your Please

Hey, afternoon. the results and thanks Nice for guys. Good time.

comment, some spec the First of much obviously you resale. tightness question, a pretty builder which your hearing ramping starts given core. about you made is built-to-order we're to similar guys what are near-term from everybody in kind the a in And at

And see mix that. anything homes, spec the geography differences curious about right standpoint? either should think far the going your What that So as if for margin your could you a you standpoint, numbers some as speculative? behind price on business? percentage I'm give we do of starts now are What from standpoint, share where --

that? take to want you Rob,

Yeah. Sure.

And mean But the the going committed first it the model. really built-to-order community of on don't we sales market, depends manage the condition we're as I going starts. to So it inventory division. in market with our to more specific we're in ground of BTO and to to the in all, specific the inventory on percentages. we'll get short-term with more our ultra-low take of we spec with reload starts lack reduce this pipeline what's in advantage current

there there and about of this at talking there just of supply XX% and was for morning X.X released that we've resale mean was XX%, record. going was just the an what's article fewer we're any list I months are And than price. think, it other there, got, observing out sale it above selling month on now homes running But on resales I in May out

conditions looking take strategy, current the So it's inventory. just with advantage from inventory no not or low overall our to straying of

those far features is are product, most with we've product, we which our as the be price of out align there to going And As got in which that the of do plans, focus to which communities that. tell are laboratories our inventory, demand. kind with in start point us what when that's -- each

on idea then stages that use the still sell sell of of inventory to for you're kind more these Is construction at for these an to completed opportunity provide consumers and maybe more homes various to moving? homes studios hoping design quick or are your

homes early, but Well, opportunity issues But materials. we will to the up get the finished certain we're if or we things stages, construction in that order is personalized not going early But point like cause to cycle. buyer at off certain also these in wild coming chain the up it's we're done there changes some But have point pretty down allow home. and to will it, an during to allow supply completing had especially sell we fast. a the any where construction to gets early a slow to delay going in them things, point where

Thank you. And next question... our

Alan, to Rob, success that it starts point, I permit. to a with say, few takes was we've to weeks because a going had get good inventory

you're sells floor buyer the the pick studio. elevation permitted. before array then the the And full the gets it plan, support You foundation in

the times the because just compress really -- the we're pre-plotted So it's but are in get start fighting to a cycle an and still, the more in buying it's inventory the houses ground it's a time stages. not start, them early buyers

very us. for it's well worked So

Stephen with ISI. Please the Thank line our Evercore question. of with your Kim question next you. comes And proceed from

the that from pretty to much good is it you comments on results. able build. Congrats you're your guys. much, that seems very whatever sell It Thanks Yeah. like can

a you or ask to about wanted I your question starts. so so And

mean So starts I where correct? in orders X,XXX could. indicated were think starts quarter, you about think that we you you planning somewhere clarify Are to would the or of be, I had I so? north that have talking if your third

up would kind think be be that then I said community And your year-over-year. count But year-end. flat you would by of

thing? in rate quarter, run And just look kind we four that? is a let's X,XXX do I'm of that kind think say so -- of times that Can a good reasonable that's annualized take think curious is annualize it's third a Is ahead? what we -- that for what and -- as can of kind we rate that to as you the starts say is you

some in in -- were Yeah. Steve. the sales we following at you color. what start fill should start previously. quarter, should let least I'll in orders in It's interesting, of terms, But general the your Rob the

in whatever we would your we of building we're sales, the fits had sold the second in but because in was be bridge and or number covering starts. also over and So a QX you're QX, last the sales and inventory sales if starts half rolling starts that year on from X,XXX year built-to-order we're

can it supplement be desire and to our inventory additional then all starts. So, with we the built-to-order would start

do that If up or Rob, But you sure on be volume fill March. QX you XX. make for about ramping time to starts want we even And cycle August would it, deliveries we're into these other want any current you to think have in? levels in our maybe our color

I think leave Jeff. at you good I’ll did that. job, it a

Thanks.

Great. Okay.

being pace have -- a pleasantly an the you're of in the surprised you I not your So payments the I sort question requirements and rate you about surprised or your to annualized by when I is, I talk credit money to quarter sort a that so of if of place ability could changed And metrics your kind you as starts forth. the make next from buyers. increased whether hear my buyers the where of was about seeing more were of earnest order? guess earnest your your when we multiply wondering good strength part or buyers, greater run get four. money they down it if indicator you on and think was they guess that be of suggesting can and

you downturn a through we the the even process committed the that emotional work as we that side a they purchase, outweighed the the ran when something of had that emotionally Stephen, debt learned rational payment on to though up definitely have rates the did, side it's when to way of buyer commitment.

you do So this? have deposits actively -- what Rob, enough large to we we're want we share, learned didn't and were doing in we

Sure. Yeah.

We've many too. price the that. we on studio base buyer base set additional things and of or got community for the then there. got of from minimum like the our profile it of divisions. of minimum Steve, it But X% a depends is goes And a and at we've So price, of X% the up what X% profile deposits and

are which a protection. several with of So and us above that, ranging divisions coverage a that little minimum X% gives more

the And you. with Thank Bouley our question. your comes of from Matthew question proceed with line next Barclays. Please

Good Hey. evening, the guys. Thanks for taking question.

like I starts. about of you know spoke than So communities just sort out up ramping of you're it closing opening. you're also sounds more

a you're Thank on this So again pricing be side? year. you an color on there where little the more kind Just this of perhaps situation a opportunity communities to you. meter I to outright roll starting the availability or of is mean, any is sales as through aggressive

put the fourth land it's think in use that as you Matt, the slow We community year, this you and halt deep cadence need term have trough continue. going it we down. how quarter do down to slow it, meter out the one the we're in optimize down out unless you're third trying a don't A a out irreplaceable. of of running we let of and we're if may that street, through sales. last about we development is the you and the it, if to count a lot lots regard assets community we'll lot figure Then

a reviewed by actually put we So land community. and on development then pause by community community it

in we've reenergized hold some the for were months eight in that openings. seven, that cases, now communities on caused we're six, delay And and developing put

the next and and X So year. the improves QX, openings you'll and right market in as sellouts we've got back see X our accelerating again come community

to We'll and a out things of not each of optimizing it's pace keep running do. case keep up asset. So the

it. Got

I'm you Jeff. which I'm simple rate less then sales built-to-order I mortgage spec that, for there your is And is spot say portion the model you elaborate degree given carries to second the guess these Thank your here Thank a Is of little insulate down? as volatility. as to curious largely kind whereas at it of Really lot getting incentives product, product what of can that? a one, homebuyers built-to-order Okay. you're you. on what actually from to buy a able if are rate including

right up your that's Rob, alley.

Yeah.

our concessions 'XX we're of longer price program. no We downs, promoting adjustments So into financing last and in back down getting buy those made as buy the specific half part a or as talked last and right -- of rate -- we the 'XX. far about half of

the qualify we those be most or just an that it's do able to the overall. needed not to and it So purchase for use it's applied basis for buyers as and part where needed that make significant on

or items Our normal financing we cost QX sales averaged certain closing title markets to concessions about cover and funds escrow the X.X outside fees in. like of provide in

and that And is transparency to best price on can provide that the base our goal offer just we price.

that primarily paid the home. basis home rates we're rate of never understand incentivized. an buyers using price the you of but so can you price and it many for change road And the downs on the So can buy down artificially financing the they be as-needed versus inflating can when the that refinance really, fall our if

with Rehaut question next comes Please the And of J.P. you. Thank question. with Morgan. your proceed line Michael the from

afternoon. for questions. Good Thanks. Hi. taking Thanks my

but to four your And given the four but you back pace than month. to five sales level -- for guidance understanding wanted normal the per within you quarter. to First, something circle the moderation to to seasonality pace, obviously, pointed in quarter, third sales still order of desired the for five less haven't fourth I a and

inventory less XX% and seasonality versus market stays of a bit that little that normal? month low-end -- decline a a be XQ increasing range bit also specifically to what's the that supply homes also necessarily kind within sales off it you're from seasonality assuming where per more to fair talking quarter, in closer to month sequential still than without XQ. disciplined, given Could staying to that's to anticipate your it staying four fourth and standpoint, fair it helping particularly you've is Is the being even the built-to-order quarter that little perhaps muted is, we described? per five kind normal third but is expect where about also So, of a drop of XQ market today's to maybe of the

think quarter, we pace it's with not because your have today in than we to that's impact sales second sequentially I month theory. Mike, quarter. as the sold like built-to-order comment they do out we our than If inventory. But better just that little market we more in quarter it's appropriate more expect we fourth tweak each an only is the growth inventory. It's did would there, are would as the stay inventory historical of conditions

as that regard. more that our build it think kept think tilt see down tilting even come you'll I I and in times way it

So, it's picking or not somebody it's and the just to whether conditions inventory a their market lot, it's an general homeowner. be desire

Okay.

no say saying appreciate that inventory also a I guess Is it's... fill bit you earlier going increasing the had longer yeah, homes -- is little you're taking in part the clarification. I I I the market. of So the that that maybe in thought that you need call to what that the to saying? heard Are be orders you're

we referring inventory the starts times release as we'll starts. more time sales two getting be we're so foundation’s the board the still as of we the things different it choose the of our to continue a was things to an the build sell cycle, to still growth we're will and starts buyers do year, by our focus down what everything. get I in compress the balance over And to look how was talking as get that we Well, the fuel But then 'XX. built-to-order primary because lot and while

Right.

Deutsche question. question proceed And Please your Bank. from the with you. of Joe comes next with the Thank line Ahlersmeyer

Hey. everyone. Good afternoon,

Hey, Joe.

Yeah.

with far. the in little around you starts bit learnings one, two success coming questions those cancellations yeah, to here Just maybe the in margin? that where on repriced we've also supply are visibility coming period so the Is was at of your the and back this also selling back to having more specs? of XQ, a actually saw time starts on homes that learnings had decision and chain to call from playing what but having this you're -- tight cost learnings, of your constructive for XQ the Is got, two increase -- quick part -- on relative resold we've to a part

down and turn corner historical, I and the built cancellation inventory our QX. cover we your on relative then you demand think so is on sales. that and a into And to, with the clear that to have whipsaw QX starts. rate QX and through focus good we've it, until we an built-to-order you you it went impact clear more pretty -- the up slows had because to has to and inventory QX it in And turn your high

now period were where so enough we the out we've start inventory, to we a having through which we clear done. because didn't went And

X, And we houses look were back that strong demand we'd surprised knew we have started as And than that in frankly, on on QX, saw. more would March we the how in strength demand did. if we QX we be,

sold we of what going over surprises we're for. now time, So in third and quarter. catch lot we Actually, cost haven't to for relative up here build had a to it the we what it

a costs. sell Our the started, we idea costs are on of But when in cases we before and are good locked homes of lot have a it. we all locked

for much wasn't and so right it this starts of now how demand to it more it we starts. So and was all in back us, keep we'll more things whipsaw normalizing as balance. margin pushing do control, go a And are

where the on big the how for have adhere GSEs code the by Wondering be at nationally basically code. 'XX energy a code 'XX maybe mortgage been compliance mortgage underwritten for would one are It's this more a with efficiency lot for second that market, to of you Rob. nationally a There's to to about increasing backed through underwritten have regulating talk -- is efficiency And requiring that based to loans just great. point? to is homes homes lift would guys have FHA -- perhaps for your energy built been of of the

that don't HERS what impact something it's competitors. here far But that that been of I cycles a lot probably our we've code long to think our are And we've all different think, and of get on and to mean markets are really we're a building time understand already lifting for so I scores to think to of for the that we've less is. energy efficient. than ratings some the I such focused got heavy point. still do on us analyzing. Each to our I efficiency been very that

So don't big it's step the I next leap think for there. a us take to

comes question next from the question. Patterson line with our Please And Truman you. of Thank Wolfe your with Research. proceed

Thanks Hey. my guys. questions. for taking evening, Good

times the your cadence of First, I eight about they're months. the kind fiscal I wanted believe of -- construction XQ were (ph), understand costs. seven months, cycle to XQ construction about reduced in the construction fiscal

quarter of quarter I year think can expect savings think fourth costs, cost from hoping flow that you I all some of construction timing down but costs would You us mentioned a help last me, through To kind $XX,XXX they're the peak. of this you about direct lot And quarter. the that. were through by another of the to this said down $X,XXX of the

Yeah. Well, that want take me Jeff? you, we you or to do --

don't Rob, to Yeah. No, you that. why take I was hey, going say,

Okay.

believe and So challenging of that come a I mean, we last said peak I it you're depends time that point down also if a from in had August, was through we we're the lot the talking was quarter about on it during timing. it houses But working market. $XX,XXX that. --

and things and rate price like sales that. on challenged So buy downs

As up that's we far additional in as ended incremental May. actually where the $X,XXX,

and starts we impact see next once of we'll year. into got the we QX see that that some of QX May. benefit in through a We'll get So bigger

you. Got Okay.

see accelerate obviously and to XX times can that. cycle we'll cycle QX. down We're another bring it bigger days, the we'll But on if faster. focused more XX we better times impact in have days Now

But, for throughout moving the levels roughly just ending given pipeline rightfully bit Perfect. do you to sequentially I'm months. you over 'XX decline flat trying little start a XQ. your pulled with Okay. trying follow on land community then, guys that past finished up to still the year-over-year wanted to second being on I to you just backfill? so just through back potential mentioned down investment in puts And expect to that's the should again and Jeff, some opportunity community count your refill from to think Do quarter count lot XX you a occurred everything understand, believe it's growth actual basis? year-over-year, of I'm takes understand a some the the or deals and here. kind XQ year grow

because things with is less variables, there six out okay, we as than quickly how what sell the to a left sold we five to out. Truman, of One in sell, sell. community count have know if can the And is you

that to move down left can And write you six so and off. five you the had communities sell get to community through and

project So what can we referring expect on versus that in quarter up. that a and I 'XX. opening the end where -- was is we to we ramp up to But around where side move quarter openings from in from

-- on We in to count, business 'XX. to But haven't guided grow community in a grow call. and to We're quarter business. be would but the at on we'll we typically, next give that our goal, our that's look first get more we do the the expect positioned the into grow business that

Please question final with from proceed our Sachs. your question. Maklari Goldman the with And comes of Susan day

to capital question congrats as guess you. results first the good morning I Good going back well. Thank the Charles Susan, allocation. on everyone. for This -- is and in afternoon, strong Perron my is

the quarter shape returning as how of look land communities see you the time. to pipeline, between has on And you repurchased we of versus been really provide You sense long investing a capital sheet best X.X the a the replacing shares (ph) Can balance shareholders forward? is it in obviously in the maybe top million allocation in money in dividend. probably your

Sure.

for often we've talk, possible And else balanced. everything does for returns balancing the invest in like policy back and with time, as and we'd Ideally, quarters in that as jump allocation been continue and them and to being stock buy we and you. to at capital back. very allowed have in a been As remarks, some and said shareholders. Like off us view same really I number favorable as the of several growth returning business purchases on we factors cash that much prepared our past base we of to the most the those the

prepared intend immediately So buy continue on a the the times We couple amount the and and that to other based factors to in mentioned timing we remarks do of we mentioned. shares. we'll that all of

you solid as current of paying It's pleased where the But right cash and business the balance top we're at with now we've very on is sheet. we're that. pleased on rock said, with off the amount really been of and

for opportunity continue deploy or compress, we cash. we that As the the shares these intend the the either build We'll buy cash in same at time. see even of to form and investing at believe bandwidth and -- preference continue times through to we to business in have same to it deploy further we time, the

Charlotte, you of in? but some That's little the on recently markets? also going at Boise you've talk if time, the see penetrating to it. new markets approaching are forward same remarks reentered can Jeff, the progress And helpful. through prepared and you talk further Got existing you like maybe But in you potential the enter the this made a touched bit. How you guys about you've can locations versus your this

Well, and success we now I'd quite we've five few start done where our years it it entered call We're West I just and last believe bolt-ons profitable five a the builder very a ago. growing. years few it's as us we look over But story And with what little region. for you I our go is things top a and Seattle and through the plug-and-play same expensive at to can work. builders, along the learn to and model acquisition. a business time, it's Novo, always we you And grow less pretty opportunities if may out into some private have there, At way. in do

first to So interest rates one markets We're well. we It's last Boise adjusted. correct was up ran entered selling the Boise. year. now of when

opened in selling one Charlotte, of and that doing We to today have a opened are that's development we've addition it's two just fine. communities the communities couple in well. And under

are as units Charlotte that more and many it. on we've in X,XXX We open were a time, as and you touched about to year got Charlotte. have large at one in We

SG&A, have (ph). So are and market complement able nice to the to been to Lolly it's to a and it's both costs and we business. know start-ups be And a we've those been now are solid carry and positioned the our startup contributors to still able we have like, and overhead, cover real

builder growth best a served three target we the has one the we you're is And want there, least As in a it's ahead, look city want market your to where spot. have a for And to. we've opportunities. to we grow top way in get where we markets. to in today every get at And number there single maximized to targets. we're our we once everybody isn't think And

to a for So, the where will but XX our primary our there's current answer, of the upside now, that cities continue focus scale. our be long-winded going we're primary focus lot in -- envelope forward, in, to push from

and opportunities the So headed. how positioned we're and where like we we're

teleconference. session today's and and participation. everyone. also that gentlemen, for you, the concludes Ladies your Thank concludes Thank question-and-answer this you

You may your lines. now disconnect