Lennar (LEN) 21 Sep 212021 Q3 Earnings call transcript

Welcome to Lennar's Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's conference is being recorded.

If you have any objections, you may disconnect at this time. the the to forward-looking turn the Lumpkin now of reading statement. will call Alexandra over for I

Thank you, financial and include operations, forward-looking good flows, morning. Today's including cash regarding conference statements Lennar's and business, strategies condition, of statements, results prospects. call may

only future represent and from the Please on to factors inherently statements Form including those that our results factors materially to the results. and SEC. Because estimates to Factors conference These and any under assurance the have forward-looking date include statements. to matters caption results occurred, differ are note in Lennar not update on no in forward-looking Lennar's subject any intended results anticipated Lennar's and give this report that these with actual Risk not as call Lennar's described uncertainties. statements annual affect filed Forward-looking could the or of are and statements. risks release SEC in to those statements yet obligation contained XX-K cause assumes filings, actual may to activities press activities forward-looking recently relate Many most yesterday's future

your you Stuart host, to Executive Chairman. Miller, Sir, like would I may introduce begin. Mr.

us his Beckwitt, here, on Bessette believe today. everyone. Collins, joining and today, Thank heard Co-President as will Diane And I'm who be Financial And just joined it as and in and I Gross, and Jon. you, by well. Chief Birthday, Bruce is CEO from. and Richard here in birthday of Financial morning, I'm CEO who's Officer; joining This course, to have happens Rick our Controller; of Alex, good road, well. Happy Dallas morning, Miami and our Jon be Services; David our Jaffe, Lennar contributing the we you also

forward. is today's straight listen, So call pretty

try to our remarks we're So to going keep relatively brief.

of for your plenty have we questions. time So

supply give to going And question Rick many can. questions update Diane land chain, construction the highlight, strength, one please and additional talk one a Jon production, and strategic to follow-up. we'll give [popular] is will I'll we as Lennar and financial macro And usual, usual, community the about costs. a guidance, As will as overview. limit answer count. market and then and usual, as as detailed on

So, singular begin let note. me on and start our low

the certainly As immune you are our third not simply missed to saw are missing to XXX delivery at we used we we delivering our guidance while quarter low-end in XX,XXX not homes. disruption, supply release, press either. homes, And by of Lennar, chain

the color chain, my and year. performance address on entire quarter instead this into effort we not land introductory XX,XXX give fourth While a on and the be feels only The land will and Jon Rick will previously and XX,XXX Accordingly, of stressed, and supply will we XXXX, our not specific at team community And the pain for versus closings remarks, will and miss, effects After while that expectations. giving of we sales, it's double-digit labor missed be that in expect expect approximately of guidance community next focus our and construction both further to fully continue XX,XXX supply current the the the our versus and guided. significantly and but market conditions. beyond. year of is for chain count previously and for production. will approximately up XX% deliveries X% reflection end it growth guided And starts, we count the the our is we're or lack we materials the

billion. without decreased revenues a our to million a And to were $XXX the production, over last our XX% tax XXX from recorded deliveries third home with efficiency of third we margin billion we increased drove sales our our with our leverage year by basis Even Alongside the while This X% from grew year. as extraordinary. constraint, earnings to the on very except basis our tightly a points matched miss strong in operating XX.X% with grew supply to year, in XX.X% focused our this improvement over chain quite significant X% and $X $X.X from of and deliveries, XX.X% basis and this for margin, versus net sales our quarter. orderly pace quarter still So results XX.X% last growth Accordingly, XX% improvement XX% and after net we year from drove closings. pace gross targeted high point on remaining bottom-line gross margin this last extraordinary improvement company year year-over-year a last before missed SG&A approximately points all-time to XXX year items embedded XXX year. that's year-over-year, the

improvement, bottom-line top-line drove revenue focus XX% XX% our with So growth growth. bottom-line over on

difficult X% our orders even new as sales year-over-year, numbers. year's net in a environment have pace this grew last to spite recovery we strong in quarter pace comparison fourth production of with matched and Our constrained of

closing Services continue $XXX possible in perform environment. closing process current as to Financial exceptionally, orderly Group the million of our and adding supporting homes while making the joyful our of Additionally, earnings the as

$X.X and quarter purchase cash XX.X%. million stock, to operating returns and we improve basis $XXX very beyond. continue this strong, into a the we strength performance after well. quarter, divisions, of million a reported to return are and core total our our the X.X balance the of fourth of and our debt strong numbers grew operating while the expect to debt XXX continue XX.X% over in our Even equity core All-in-all, reduction the shares sheet of balance billion capital With to and as ratio, points of on of

Of our generated by LENx in the this addition we have of course, entered our investments upside to markets. some quarter additional core, which public

processing, our Hippo quarter and end, and recorded just automated include still profit investments. companies resulted Doma, $XXX under SmartRent those from we Title, these entry systems, mortgage by market insurance, conditions in for million of While Blend lower those valuations home

are the primary a quarter, and the core our for are Wages continue while the success down monthly are the build next So for we we're Interest that deliveries to to is strong might home on persisted existing we our guiding our homes are prices affordability larger consumer of last strategies to strong. time continued housing still of even the the we be new different to Since move time ups. offices. continue even come All continues driver and define likely been this home. seem The fill though as Yesterday's up consider Yesterday's families. Lennar’s an are of have business production supply as decidedly for construction But Apartment Diane for average though limited guiding Demand from quickly From overall Millennials first come. rates perspective, macro fourth housing an times. -- and remains be customers to for best time strong. our is pricing story, expectations to be give while year to for at rising homes. more family market selling numbers visit market these while lower and demand personal our home to move the anticipated is a than And they future. story detailed of enabling time first in equity, payments. the a that remain savings quarter. than over much optimism were homes purchasing and strong enough of Even higher, remains hearing field reflect equity void at and remains inflation dwellers some are the forming are strong, deposits guidance consistently the new our limited. has ago selling they that for deficit the rent seem faster the tell moved is higher supply strength to to purchase and will customers is and first spiral cannot needs. for the up short home appreciated with decade, supply prospects enabling upward everyone. increased overall this prices the

Additionally, as convenience for of essential rent rent is becoming being is family supply are The The becoming providing the marketplace. disruptions. home providing family participants coordination single real lifestyle while a families. factor a The by value of liquidity iBuyers are single itself. the chain iBuyer for while closing accessible home more of also provider more single proposition and an family complicated liquidity in are to participants the to new a additional making convenience the liquidity and providing

the lifestyle more for ownership affordability Although the a exacerbated growing for homes access is is families have single provide rent, the requirements a housing and those higher stock while the can't families, across yet they more home meet build rewiring available of that outcomes portion country, crisis for industry Professional home if well renters better to housing credentials making own. housing ownership. solution Better to to enables prices they and families of documented solutions. to building to produces the the family

strong, just the changes is the and As builders as in the will have before, now, circuit noted market very But built. the we the in market also get homes act housing cyclicality the to for breakers housing future. for

company in too let talk spin the conclude, described briefly have me past. I I briefly our Before about that

and is the can and our more cash you see, flow, from more As SpinCo balance compelling. sheet case for becoming

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Zames, the not company, expected picture want To to we standing While Board. to President of JPMorgan SpinCo SpinCo to detail him that operations, of detail is new a right. timeline market. help and a just changed I extraordinary focusing will and serves and public nothing end, in we the it personally Chief in newcomer very as with of with Matt an execution do advisory company financial a is financial and expertise Chair serve is worked on has Officer this on time-consuming help or and to bring world we and Lennar complex, where it of an format Advisor execution our veteran incomplete past not engagements execution strategy. scope, Cerberus as as the with Board the of participant, new a up various as Doma an Cerberus Matt's through our get the detailed quarter, Matt in for and a a Matt miss Operating engaged configuration opportunity advance Capital the quickly to Senior modeling and our of seasoned services Matt successful a as the past Chase. have and

and new senior review team focused Matt map In company. structure Jeff leadership leaders model of to substance under meets on addition growth team McCall we the Matt, to to the regularly of supporting with the have of internal progress. sequestered work expected a when This structure, the and

the leaders We new all projected up verticals. are the and includes standing company a backbone from SpinCo team the

an management that noted support our ongoing active our configured and third-party last -- to raises as As be verticals. SpinCo as business last asset quarter, capital business will independent

are its already third managers. our configured asset As platform these raised raising approximately neatly of X verticals fund LMC, of active these gross capital operations. billion have $X right single-family already capital management third-party currently noted, under rent of equity billion raised. now. are and has of LSFR, multifamily $X.XX programs growing Both self-sustaining our is and as approximately manages for platform independent

that independent refined, Additionally, exceptionally management we growing business is see refining technology a our from land well and has under business we as and a investment LENx. have been been can land name you have numbers, -- dynamic has and that growing that, performing the

last this noted from and homebuilder separation enable these I quarter, blue-chip businesses independently. excel thrive to As will the

pace. seasonality organizationally financially, to market. and Demand the spite So strong sales market supply let me and positioned grow by and wrap conclude we us deliveries saying miss that disruption general the up and traditional the even thrive housing our of chain we return that in very to and in is evolving been technologically and in as annual simply never have remain better this of the industry, overall affecting in

for market limited. I orderly and homes reducing be industry, Lennar strong SG&A, targeted gross selling with is the shortage given while course, We or focused production. We pace the quickly of we of margin. expect our able supply should with And growth with imbalance by our an driving and period While challenges, in remain to our to time. challenges sales on focus step remain current for say, not matched difficulties in production of and the in therefore, with industry its on chain market tightly pace remains balance of costs chain the the net Accordingly, increased controlling new present margin our housing remedy the supply production. very in will the supply existing supply extended

front our for delivery rent We have with a the delivery and just-in-time system we finished end have SFR a our program. just-in-time land at homes at for for built back built system single-family end the

from are on versus on return buyback land-owned controlled, stock end and focused our We return innovative course, cash on of on upside and debt and, driving on flow, upside investments’ capital and reduction equity and incremental technologies.

talented and the same group of the We associates driving them forward world have our business at an amazing around caring about time.

to We by worked are all the for on metrics, our driven this performing extremely future. benefit have foreseeable remains condition and excellently that strong strategies market

Lennar. is begin strength for As demand and double-digit XXXX, look the growth see The to market supply in remains and we we is continued short story to strong. that

for that home slowing With to expected. and the for building Some that believe concerned constrained and come. it production making market up Rick. prices and sales should that has over sales sales demand because made which move a me slowing decade, many those keep are We is are the been move, us as that, to were it time is feels through we higher thriving the deficit to interest let than early turn now, are rates some slower industry housing

Stuart. Thanks,

very As you the is can from Stuart's comments, tell housing opening market strong.

carefully where cycle and homebuilding to match execution homebuilding our team finely to Our Key coordinated well basis. a extremely caused chain on are financial cycle solid strategies. potential is prices issues, later with from homes strategically increases. sales we supply appreciated market longer tuned to been production operating selling machine and by home continue the a maximize with running community-by-community our In in cost slightly that times results this benefit the our core has of offset production of we a

basis XXX achieved results XXX out of third of prove basis points gross year-over-year this Our points the strategy we as margin and increases quarter success sequentially.

ramp started and sales-focused continue homes This third During per margin-driven ended community, homes community, new deliveries to across XXXX, entire orders, each margins in less quarter, than quarter. XXX strongest X.X gross In production, quarter strong homes starts deliveries the the improve in up the operating our given were unsold program being lead per quarter, we in in quarter. we increased X.X and of August the with will and completed and margin fiscal the third sold with third to regions, our the in footprint. month the

price hot from active move quarter, year. in the cancellation adult. In level to earlier is we historically XX% the in trends. reflected year. which a rate normal In up a continued the to down addition, has third to low the was of market from quarter, to was basis market in rate, XXX being all although to strength we product categories, entry points from also a The strength strong last at than general, In in extremely that returning market lower the achieve moderated seasonal increases, saw

Coast, Here's The some from is Florida limited, both the is in-migration which of close. Tampa. Florida is Northeast from Broward on driving moving some as in West well sales Miami, markets demand the and core Dade stronger driven to color Sarasota pace and the price. Naples continues in extremely and Southwest; local both -- continue be as our buyers markets. to being benefit hottest in and Inventory which are the fast and to and Southeast --

the Inland with markets from the job of is continues pro-business and from the relocations out-migration driving in West. are Charleston We markets These all the and state job sector. the employer-friendly -- growth seeing strong parts corporate is California level limited recovery markets. higher markets the the there gas strongest be the environments, Las from recovery also due in markets. to in from a The the from shortage, each are real where strong strongest we I to in-migration quality in supply. home oil strong East All Bay are and across and of positions. economy extremely said, from builder be These living. and is The real more affordability. are and the Texas the are Charlotte growth with is with technology markets, the a Phoenix and migration strength from land to city a to money some markets. to of compounded Both due but depth country. California. those best are state's Empire, benefiting housing tourism. of business-friendly ability The in Vegas country severe set. growth, the coastal Raleigh, the Phoenix from affordability continue also are strongest seeing is there these in full Sacramento for benefiting Las East Orlando strong the benefited markets Vegas state is with leading markets other from larger the especially and state's these market the and increased California. buy casinos are builder inventory, the by benefiting are job area benefiting The markets. California, of in in-migration We're of than tourism. are top and on tremendous thriving Driven increase the demand -- as in Notwithstanding

a to few moments community growth I'd Now about and like spend count. talking

While by out the beginning some caused which is community year-over-year sales the we year, quarter slightly the up driven a a This flat from to communities our communities sooner of existing expected. certain in pace than basis. was faster count on ended close

caused the Our open compliance to the development tropical only the inspections Similar to sick short not safety the modifications protocols and ability quarantine this severely hampered of land failures, associated slowed delays forces. with operations, with channels COVID primarily chain-type homebuilding a snowball really crews experienced chain COVID land communities PVC, Likewise, drainage logistical year with our the from but the site-specific process chain by active delays workplace the was of to quarantines, with ensure by of are caused approvals but to had delays on necessary basin the staff delays various process external instead overwhelmed and to The variant The due and not to new supply added shortage already community structures in process. inspections. combined timely down many supply due existed, supply conduct because Delta by effect timely these impacted basis. being any to able municipalities’ impacts and permitting valves. workers of the that to getting operational by issues issues entitlements, also municipalities not count of being and

in with community persist, count these we a challenges the managing now X% expect we all end in beginning the mind, While of targeted challenges. XX% to this the increase versus these year proactively year. With at we are the

While a goals we know next we these the our pipeline land meet and is just our several more communities On thing to these land note, with are queue timing the disappointed that remains a robust will in growth plenty online. years. this positive over come delays, of with

strong several already good this also are next for owned see community excellent buying to our as markets, or near-term are pleased beyond pipeline confident and we all We're opportunities continue growth produce deals We the controlled. pursue in backfill of to that deals years the count will with by quarter improving end and our years light year's progress periods. the from to our homesite quarter of supply homesites controlled strategy, increasing X.X at for as we're same land years evidenced X.X our XX% making owned third the years the percentage at from on the last third to XX% of

like worked I'd efforts chain. challenges thank of our the we've to their associates as with tireless Finally, through associated for all supply these

over to to Now like it turn Jon. I'd

Thanks, the Rick. Q&A. through chain that briefly are industry, answer and questions Lennar in I have we address you the the are now disruptions detailed we'll and managing how any impacting supply will

QX also closings quarter. cycle time, time that stalled a to supply fourth increase homes, but disruptions our As into beyond in our be build Stuart these closing by noted, production led some general miss to delayed our shortages causing driven that to was for chain cycle intermittent

not creating at you've are also additional dates. approximately for cascades next. and chain quickly times yet. weeks In had from and aptly are a different the is are we but third various creating disruptions many to outcomes. of rest trades surprises situation changed homebuilders, They they Like best X our different at industry, to not of trade a quarter, dealing construction The the time of from building X delays increase ways, As process truly game different delivery whack-a-mole, is the Lennar backed cycle Like product we geographies. team heard affecting this that the companies, in reaction possible cars, from and manage traffic it's saw that jam. the only up, in a other intermittent, with over our

purchasing Lennar, to are each with solve extraordinary and our work issues coordinated teams real time partners. as of with day-by-day Fortunately, chain, we needs. ahead basis at supply construction partnership our for as a scheduling our demand managing We trade and in have partners that well are in planning very our on future

Included Our most decades-long Everything’s as platform minimized of we impact supply shortages out have lead become have can times far to expanded the fewer of manage plan has for we more material needs as ever important has and SKUs materially chain manufacturers. in advance. This than

Additionally, in where earned with we're grow. their collaborative the us focusing with manufacturers, is reduce to partner. Over work interactions now the This to solution Even our sixth have year labor them enable needs to them a this them. a Builder span, in through has in to partners bringing trade of the manner our at partner this partners. table our with is we partners seat their versus rewired our existing of time hurt solutions strategic manage in stressful inputs, partners times being help by and done help for cost on trade alternative these our building them Choice

detailed and was doing trade better ever job a communicating information. time partners needed forecasting it at most are our We giving them in when a with than

a it's based on in Florida, few garage this effects perspective, believe siding. the see and paint our concrete me the then the vinyl are would of all categories greatest right and most impacts plans place engineered feel quick in you national expect Let insulation in sense trade the We On are cycle and to our manufacturing regional now. labor Southwest for basis, wood, Phoenix Florida times in capacity and QX with a the being And next backup windows, by constraints. we XXXX. Minnesota in a doors, Central stabilization block of of severe have we'll partners, quarters. Texas, we lumber of and in North impacted give it brick is where From felt

this community, us our or consistently last in with the community we start focused third entire quarter, X.X in on year. regular mentioned in pace. supply quote, are for homes now foot starts lumber our in increase primarily quarter advance In lumber activity. homes per chain cost the quarter closings third in costs and construction The X.X our we increases of in impact year earlier, in positions increase. homes support up As earlier third to And remain year homes growth as per third from And our $X.XX that discussed taken impacting these started increasing in XX,XXX were per third from This averaged as order of about XX% quarter, are the well quarter, for from the close. last accounted that the costs last were in we year, communication XX% over square XXXX. in up up the

in with increases various have from lumber categories, level through XXXX QX will a costs result in shortages. thereafter. QX. These flow In net labor other cost of cost as a costs resulting pushed the in lower but and of second lumber, supply reduction will been lumber quarters closing the offset will in increases reductions increased at be chain third see by by and QX, We although and reduction product costs, QX disruptions in starting

meetings environment. percent Rick, regional them truly presidents focused and Gillis a in on is all is chain Stuart, supply in partners. quarters, year. solutions This as partners. production As cost our revenues nimble Overall, with learn, execution, with and the to decrease Choice pattern craft of as these we understand on the us be and responding We current communications, of in our myself, revenues and of implement at Included have noted our than In compared to prior reductions focus construction team weeks the then deck. months XX.X% pace review our It hands platforms combined and and by listen Everything’s disruptions. a and SKU and resulting daily managing enhanced on to execute the additional Kemp increases, ahead, further supply through managing needs XX.X% leadership this of in disciplines and meetings, last growing joining Lennar an a allows support maintaining through solutions. to in Builder key for our of the challenges cost construction management chain with are trade then we a faster team

it bumpy work I'll of ahead, much two look partners, in through. Thank in growth a we solid over jam and As now up are or road trade And deliveries and parts to there from cooperation turn XXXX. setting Both appreciated you. we increased the starts are to for our traffic Diane.

good Thank everyone. you, Jon, and morning,

Jon homebuilding great and a performance. of color regarding have deal Rick provided Stuart, So our

I'm So on going for other segments guidance results to and spend few provide detailed balance our of XXXX. minutes therefore, of then sheet a our and QX business the

Financial starting with Services. So

team Mortgage operating For compared million to million to the third million year. prior quarter, reported operating of earnings in our $XXX the $XX decreased Financial Services $XXX earnings.

the business as As quarters, mortgage has more we've market refi indicated purchase have volumes for several with declined. become competitive

As result, margins decreasing. a secondary been have

earnings growth impacted per $XX in by driver Title the increased Our $XX secondary third Title compared lower million earnings. the million for was compared both primary transaction. the was prior operating margins earnings in quarter profit in to increased decrease year. volume the the due and operating to to negatively to mortgage and year prior

laser-focused technology, on of team productivity. efficiencies driving been goal Our and higher automation the with has Title

Lennar our to turning then So segment. Other

earnings investments, Stuart driver Hippo, and our For recognized mentioned, we $XXX these of on million quarter, the of is quarter, growing mark-to-market during investment our operating as Lennar went of the technology public, The our business. LENx, investments. which and the third SmartRent had earnings LENx Blend was gains segment million. Other Three $XXX of

Holdings, in Sunnova. had do public have third an mark-to-market which And the as gains million went also Doma and on investments, investment in note, public of existing We also our $XX side a Opendoor quarter. we

for or do ownership. not we million. would the this because our accounting noteworthy sheet, have mark-to-market marked level does gain appear $XXX to in we of not utilize balance investment, this Again, primarily P&L a point. investment our just been the of However, If unrealized have market,

with foremost, see upside continues but can So earnings. homebuilding add that our value you LENx core provides also operations first potential to investment and to,

almost and million in had $XXX of billion debt buy borrowings We I'll is to billion Now turning the no which $X.X minute. outstanding balance to revolving early facility. stock, deploying retire We this a our our and back sheet. with discuss quarter ended after on credit $X.X cash,

and return on years XX% to excluding to and our our XX% and quarter generating inventory decreasing lighter to owned, significant in a developing our system progress increasing owned and X.X intense and the homesites. cash focus percentage not consolidated with year just-in-time flow land continue achieving prior our this become year prior a This from in strategy owned asset homebuilding is consistent returns. on improving we to supply homesites We All home, resulted inventory, from end, XXX,XXX increasing year. by XXX,XXX homesites in all At resulted the XX% for in controlled X.X execute years delivery returns. controlled on

paid amount totaling we During year-to-date million. we the million shares repurchase shares X $XXX and quarter, $XX million dividends million, repurchased $XXX totaling to This million. our X.X totaling brings

XXXX, in further December saving we call that notes million our X-month and We X.XX due debt as in $XXX were balance feature. also utilize reducing par the our retired interest about $X million early senior

call, senior January with notes par This million until maturities maturity, note XXXX in as October XXXX. to leave also will month. due Our prepay X-month we next will which us the no utilize a $XXX next

off homebuilding the quarter, $XX we during also of other Additionally, million paid nonpublic debt.

our our to prior XX.X% from down all final pull at total XX.X%, sheet. And debt balance points year. together, capital you few when homebuilding So a in was this then quarter the end, on

year, value the our prior billion XX.XX in per approximately increased equity prior Our to year. stockholders' the to XX.XX book increased $XX $XX from billion in and from share

return compared And S&P grade and are ago. X with now all year equity was by to to upgraded in June, XX% investment rating we Our agencies. on investment finally, were grade a XX%

and are strong with of proud believe balance reflects execution of the the extremely it strategy agencies operating We status our very successful as as well our the sheet.

fourth with brief to so guidance quarter, for homebuilding. that let starting overview, turn me with And the

And our orders we as new range expect deliveries, as QX we we've XX,XXX. in to seasonal expect be the XX,XXX return We to patterns. of be about to XX,XXX to homes more said,

the issues, navigating Now course, number on same uncertainty. supply will be outcomes each which, minus But bring we to every deal it are plus the great to this due estimate has chain some of dependent homes a challenges the because and of or day. of delivered final

as about we appreciation. QX XXX,XXX average price should continue sales see be price Our to

X.X%. to we be We expect SG&A about our expect XX% about gross margin our to be and

will believe range However, joint down segments. $XXX million. to combined million range of We earnings million million $XX And number on once homebuilding purchased to other in Then Financial amounts to move bit as our will competition in $XX for for again, the turning up other or delivered. the categories, sale loss for QX of QX Services business our and a these the be depending homes business continues. venture, land expect the we $XX market a of

of We adjustments their price quarter. will the we million expect does This end to in multifamily the since about $XX the our mark-to-market guidance be for this Lennar include investments, not And to determined category, expect operations at of $X potential million. Other to our range earnings by breakeven. any stock our be

G&A will revenue We our $X,XXX charitable on be be about per foundation home. to total contribution based expect corporate and QX X.X% of

We expect the be for rate XX.X% XXX should quarter our tax and approximately share million count the average weighted be to approximately shares.

so quarter. EPS for when to produce an the of should [$X.XX] guidance this you $X.XX share And together, fourth this per all put range

And to that, balance to our so and XXXX. continue on we positioned And over with maintain execute sheet strong have operator to we well questions. the cash strong me a as core and remain for operating it generation to focused flow turn our fiscal returns, strategies, end let a are

will question from Kim Our first Stephen Evercore [Operator ISI. come Instructions] with

down over a the ago, it order year specifically. demand that in Appreciate and and all rose home level homebuilding supply the accurate move how we correction Stuart, to upward, you was might have the about be months X to detail. seen between there talk to home demand. reduce want I more as describe past since the gap industry supply, a prices the in talked about prices business the of to depressed

this a at as so have also being demand to it's remarks, about constraints your opening quarter, talked too. in say that supply about And fair you've But more normal worsened level. seasonal

how this did point, demand say things over still to prices So basically, I'm respond maybe trending above what you demand still is, actions And in say home September? that asking and specifically, you would you are how took pricing are And generally rising? then would far thus supply at more the is summer?

last interesting Look, that sales think it supply. daylighting conflict sharply Steve. the So But into say very clearly you in demand and at the went I fourth is the cross you're kind around above then you that of pricing year, that you pattern third about the and would you of time, And stalled question, up if do picked therein, COVID as have of these kind power. quarters. same see and is currents.

are a time. embedded catch-up kind back sales relative And that of comparisons so numbers at was in your to that

So demand. yes, you actually still have strong very

strong have You very sales.

And clearly catching by not delivery that anymore. up the that you You're and demand slowed is have because outstripping a system chain, or supply a system production supply short supply. is

nobody a to pricing you're numbers in produce. that's back moderated pricing how the of see check pricing has are sales pricing in way little that past and comparisons ask is in helpful? and our abilities with seeing get there. the our production kind because can -- sales, about still of the bit power, sales on that summertime, growth and ahead out pulling exactly You of what When actual that terms keeping are Is sales what out actually tepid wants you But over over power. they seeing

Yes, absolutely. think of and important as I unusual some Yes. course, Then out the did point, focusing at to seasonality the beyond. call year. start last market you XXXX is it's going to on more Yes,

next I And numbers. my to to that. gets good gave you question wanted of so some sort -- Jon,

in lumber cost, And gross cost your could maybe in to help way of you on ask already we the if trend then trying margins at return? I a to next costs of if suggests that by quickly way you hang level you that that an margins to and prices expectation sheet the -- sort a actually major out starts may $X.XX didn't balance, would generally I in I of you for home some have that us in years I about a normal back oversimplify norm no XQ next I quickly of for greater are XX% about embedded square in margins sure balance next into your trend talked as is see return you for that, fancy was supply Street of saying of to convey. the per to time margins I will a outlook, return and lower part season what year. cost said increase. the cost. forces laid be other would And a were make assume we sort that for going -- think curious, come view think my being wanted follow-on areas to is the that The you've new see of what than Stuart, reached decline are going of foot that to because how are some in historical you And with demand lumber is gross year, in already more structure, gross that, one land inflationary terms that here how to likely was Or see few I understand outlook upwards. margins disagreement could is wondering over which margins and margins?

Steve, follow-up. your relative first to

XX% other is QX. than me that again, foot categories a the we me that that lower And see that. say, that's we we're heard starting down You benefit we'll September increases starts you build will heard greater in cost delivering accurately. square combined, in homes benefit in cost per expect accurately on the be are resulting in be that, The that Lumber price, I incorporating we'll what of its seeing peak. and QX, quite the about at from that by lower

ahead think of asked think X years, to as that X, XXXX, make. the you To strength. see we certainly out I that's too margin X, Look, we're a to as hard projection But margin. looking about question

only are sequence those probably numbers cycle down You're down. in item, And the to materials going ticket are is that coming has the and while come starting respects, noting exists. and flow labor production in lumber through up that big some

So you margin of do have somewhat protection.

our think weigh in be strong. quite margins continue to to do want think ahead to are we going As Rick, that? you on XXXX, we to

well. just got with have our same land it downward is. in would deals XXXX guys I everything that that all for the and almost pipeline And tremendous intensity. got pretty land We're a No, covered for fortunate underwriting in we've because seeing margins. We're nothing we've you think XXXX. shape We're what visibility in reflect adjustment

we good about pretty So where we are. feel

next question Our comes with from Patterson Wolfe Truman Research.

than birthday, Good of call. way I a it spin Jon. think happy conference better a morning, everyone, couldn't on to and

apologize. do comments I the call. the opening from did during I disconnected get So

double I to But starts that up on if apologize. you was said, all increase I So anything able year-over-year. XX% were

the months. availability You're seasonally able just winter Our mentioning double-digit to improve you have on actually some hope is fairly support and think to discussions in during vendors. be materials significant enough supply Question is with manufacturers evidence your seen really 'XX? yet. But they'll we capacity a Do growth issues. any chain will slower the inventory rate haven't

you And you're these to quarter. second Just in the believe year expecting constraints said by the on next prepared unfolds. I ease your trying how take remarks, your to get

wanting understand there. to your thoughts Just

some that's room Truman. to double-digit plans not methodical. not It's our a I And times plans visibility, chain. growth feel up. Yes, place, breathing is manufacturer have partner to us. that lead all -- we're still the that yet, It's support the the manufacturers, have some as that's we into over is of there growth which planned. very stabilize. trade change have giving expect seeing that our will what place very confident clear to we that get constraint catch manufacturer, by mentioned. And mentioned, that that although I we of next We sudden But QX will I on that's What trade meant us we supply a as supply give we right, perfectly times as not in cycle in is chain for start partner that manufacturers feeds by expanded, by these have our year

sales our both mentioned, production As pace, Stuart and match we our Rick pace. carefully

trade all good visibility is this our so real with planned And outweigh in support partners to us. for advance

that I hands can Truman, how stress don't to on been be. has continue just me this add will think Let to that, program we and enough

the and trade by fact, very our their with Included our various offices program going In over partners. like Everything's of proper our we homework don't trade where still not about done volatility to in We some get one-on-one lockstep making as daylighted more sure Builder partners, maximizing of partners, much we way are more Rick to on is and and in out jointly preparation are out meet that's quarter. bring months. that we strategic We limiting with with next in the Jon We And what with can to think we're We've and with certainty that There's making like sure setting of SKUs, market. fourth achieve. developing that, lot missing. and we're what but expectations program, ahead saying don't we're what we Choice affinity focusing that a are achievable. go

the emphasize to program, the manufacturer to just from what times, Included point, as times lead where ability have Xx Xx our Stuart lead their normal anywhere of And know expanded said, to studio manufacturers times. adjust we're effectively way design to a build compared and to in going to gives ability as communicate their very lead really advance with Everything's the program those us

share 'XX? think you been hearing of With all growing or start your community to still trying dynamic going it's you are how, count land community fairly the constrained. land community XXXX, constrained? they're of walked count Or and to well? trying you just viewing a see And becoming a delayed, in then going that into entitlements to year-end. understand to as big We've and some they're then count, competitors? will but remain permits And some normalization private catch-up modestly, in you also down inventory view X% your we market Do potential how picture, more understand I'm by

So I'll take that.

builders. share builders the their to really that in us The regional to a top market see And have going community developers land the difficult you're industry to the count such the a think the continue overall to the deals. get address up. smaller advantage have in market shifting have and I time want market we is

where in number plan So but XXXX. We've in and one. And has the the Number we've growth way. my given chain getting planning in do whole help more -- in of entitlement double-digit and us on going talents. to permitting land two, disruption way all can a place, remark supply comments, efficient good mentioned as a things deal I them, and triage and with count make that's my those us This community to ability help how our approved problematic, got the through we some we're that, we're got point we we're anticipating in visibility. are to thing

confident that's pretty going do. what it's So we working, and we're feel to

Truman, has plenty count to have let but It's that Rick say, kind was little that comments, just to that we bit add something his of of very in somewhat and said nuanced land. important, me slowed down a and is right converting land community that now.

really communities open land it your or some actually have given that, impair actually tremendous our stickiness. of machine see that with advantage But might where ability community acquisition, do more the where it's plats getting we builders to and get land over PVC you and in land. things open development entitlements markets out or the regional where to shortage smaller, accessing final visibility land that or engagement like So you those daylighted business. that's we it's the approvals have into in have count actually Rick finalizing final tremendous in a our the

we're we visibility pretty exist we're that working excellent and that. good, just have of at through good visibility think about pretty the -- in the the impairments going. we're not It's I going that level So field, where some where local on on

Carl from hear with Reichardt will we BTIG. Next,

are I us a to chain, chain or the to path Jon, mess. stabilization, catch in on right? out, early type to keep supply future? how trying more or XQ think, you the the a industry but tell keep you can, might the in process normalization? 'XX. build control use More to then should signs supply -- the we the you the ask And normalization? that. the tactics It's product impact kicking, in figure the won't times for And to critical on for a about long or we’re in looking I Stuart, trying get I Is be What I'm called does that availability current the run, over it environment strategies I

and have. get also, to needs help And out trade doing. volume that, partners able to ours we partners that those we're I to ramp coordinated can again, to to in of make mentioned, additional support very bring that And we of signs to as our not for match conversation quarters in manufacturers can So what productivity at and in to mentioned, relative as really stabilization, to the they planning that months I about with key weeks, look in plan our ahead to coordination process day-to-day their partners. up trade we're it's look the so closely the are key enough that sure them. And is

before the you're signal kind looking going to not going that -- it's numbers, if That's flow wait and others through of kind I going see happening. for, of a to you you're It's and it. our it And see until you're view But see it's going tell it Carl, that we for can don't think to to going watch to be until you of happening. just my you're we're to actually see it. able stabilization

That's right. exactly

that and we the that, visible. through outcome of will will work it up process, As this be be show planning

then. mom long And are had whether pop Challenge for your term approach pay, the of are have availability homes Okay, you concerned and see, than about for ones non-owner an you build single-family sales they're Stuart. on of look land transactions to traditional start-up accepted deliveries is I you has the to land of operators? of all? what might, still some going very now, Are to build-to-rent there. that talked The that question it's on impact good their opportunities pro operators next aggressive rent. more you or formas a and out percentage Rick, then well-funded institutions beginning different who What sort occupants to builder land willing

final -- markets, and users. an we on -- the start buyers and just part percentage might regular let haven't the numbers what rent Many versus have some a single-family been So of -- are there we for many just nontraditional users to me ordinary are say have market what say are separated going in out some don't of the the participant.

important enabling currently, those haven't people we the lifestyle, is is But just into single-family can't a So get get think I market down-payment of and which out an who part a going, it is them separated active where the necessarily greater numbers. good.

So address other your question, which players. component the do competitiveness to of maybe second the I'll -- SFR the second was of had with

associated and As market, relatively Jon been we're at and I this, we're seeing have these to close very with looking little the competition deals.

we And work to the developers want businesses As the many land, got making structures leveraged. they they're I And have. sure that players don't land people have through make flow cash These that as want on very focused the they the sure that cases, because they've close cost result, the on to other said, are keep up. their execution. a in

So we the they much cost so build. build than capacity standpoint, have cheaper from to a will ever

that So it's they feel disrupting the competitive threat for us any difficult landmark. to in pose

with next Our from Ratner Alan comes Zelman. question

material for facing. guys your you start question, of the obviously guys first you went into are detail lot quarter. pace the challenges a Curious on So on

You’re were obviously but X,XXX up a homes starts lot down about your sequentially. year-over-year,

some that what end? Or getting design prevent Is into from of curious later-stage labor tightness was more even I'm that? by that on of a those to worse? the challenges So function went front material more

the think of that cyclicality normal the correctly. process answer of the is of the year, planning seasonality I real to year, in the more the

our in feeding have quarter beginning that then third second feed So starts our we quarter. into the quarter, And fourth largest into typically quarter will the of the starts year. are delivery more

normal a of more pattern. that's So

Got it.

not is like is So so of outstripping going that be view going wouldn't sharply to from negate to start type against or seasonality supply, you're demand that forward seasonality thought the accelerate outstripping supply? the far that any move perspective, process demand that so a given normal trying

next think I we that closed see on we the we the supply, stronger that the in that few as than Well, and demand because is quarters. said that gap

year-over-year homes. I on demonstrates I as we're up quarter bullishness starting think starts, said, our third So in XX% more our which

it. Got

Jon. appreciate that, I Okay.

that underwriting the comment of Second dig deals land still the made you're that, back question, a end couple those love little would circle I the guys land bit margin more. with it at to Rick, underwriting. today? flow a might same implies margin range in to look a a you when to I deals that you think, intensity. to land comment And into Would delivering for gross recognizing it are earlier Does mean of that deals through, towards today, on that XX% question you your that underwriting years on and take love the that

we decided margins I'm got pricing as on to we to that as underwrite cost at Stuart we've we're term I Well, not take not answer and to to near going think very But that well. bait the and years X or underwriting X what look X and as now. similar out structures,

Our next Barclays. with question from Matthew will Bouley come

production if maybe following think it year-to-date, I I'm on in quarter. obviously, Just right the math was around the about latest per doing your the up starts, capacity, X community, X.X%

next You're talking to communities year. increasing digits double

question X put -- to chain that you you really an easing supply is number production Or for make like as perhaps need in achievable you because kind look would mathematically, an of that homes is, XX,XXX to realistic? do a if out produced? my So rate to 'XX close that run

through ramped in in to anticipatory We've as production put it even could definitely beginning chain, be But how We'll least the early the it's we trends. meet starts and the be we evolves order of on see we in appropriately up year. our to the that's to And year. early look, the volatile, have going an us. would were We in year. supply long-term demand starts ground enable that thought what going need at

You're right.

get the evens supply If XXXX. itself to going out, how chain to that simple see actually think cycle But interesting what numbers some as right now. for become like supply to go complexity disruption rippled there's you going that an actually exists through year year. year early or And you times you we're a the do math, can I chain be next from

next giving double-digit kind significant see in market the really So we're strength will growth right that year. we leave not and reflect that we're guidance our at for now. for daylight that did it itself going We to in in of metrics,

and but we'll their also trade is As shaping look with a supply daylighted the the a one-on-one Rick to up we for better what and Jon kind mapping to are quarter be of system of the facilities, and we together give quarter, going -- based in meetings fourth be out belief that on very those will helpful number expect. pipeline, in telling fourth our in of out partners what's found meeting chain like and the and what to year. following I the it But we only better not and understanding get guidance a really can

will see update goes quarter. it fourth our interesting so be in how to the And

Great. Stuart.

in sales pace, help on but just up and the quarter couldn't the the at sales the sequentially looking one, Second was your pace actually in East, notice there. I that regions

I curious, come different to to markets? East you production pace just top production X? Florida. in about Is there? But different some that over overall the speaking demand continue to what again, gave about what's strength there at the around just I'm your rest allowed by you about just great commentary Or keep know was sales of So easier the

Rick?

Well, of there. I some we of Because Really that hasn't the the concrete block faced the the We regionally. think company we Florida East. particularly dominate at Florida. have our really the trade correct? markets Is with We in a of issues it Florida run have many way in and the construction East, from look -- lot associated as a of framing. -- control good base I

drivers that. So of that's one of the

don't Why more we X All right. question? take

Maklari Susan will Our from Sachs. question with come Goldman last

a and should more kind little option question coming My But talked more it this land as -- thinking for how give first year? just you're be strategy, is about we targeting that's we versus about bit how owned sense of you the exactly of can of together next us market.

worked a structured program course Well, I much building an for talked to think where a for program to working option extremely we we've institutional And make is that higher we've about migrating very we're with in quarter-by-quarter. happen. owned we've focused of now. and on have land migration the that number us kind really in that is we laid And that in that that's a program We've out. executed and daylighted that optioning of making place we've focused very well. this model enabling line on quarters quite orderly land program. have for versus what And And

land We the more number over lots land a front for with held And but and developing are less improving our that are delivery are see quite in our or is actually really that you'll optioned program. actually future. that be -- that on more land structured just-in-time an time at the will books for positioned think I of more end much that system that much homesites controlled we're

Okay. the That's follow-up on you've side. obviously a then of helpful. SG&A is, made lot And my progress

about should forward? talk you're seeing be look guidance And X.X% that thinking quarter. for what fourth we left we the Can there? else the the incremental you to coming about together as initiatives took is that You

So, Susan, SG&A. thank up our bringing you for

step think feel this company points the we've how we bounce parts a the think I a our has way one model on that in improving basis because of our at points define we basis important that and XX time X is all will future. underlying focused got most of our

reworked in part numbers and to can to our we the way grow. field, we're of commissions, the controlling the to after bring and operations awful the it's IT numbers run. items from our -- our quarter and across we're from way continues business from our close closing our light opposed Our end to lot construction that initiatives within as are to projections with of marketing of realtor big our a in putting way days business aren't replumbed getting within the SG&A. all net Every an business, of and efficiencies people in digitally is our way margin the system to being that books automatically that quarter reflecting just all for quarter It's the days, plumbing work that quarter literally of injecting SG&A. our there efficiency, in and small after element compiling to the every lot and point actually group and quarter of after And our internal

we have innings I think still can enough we're in at improvement. to important in accomplish the most questions it's of just about we the quarter we're it And some one future. we have divisions that that So think -- And doing new taken things. the it. early of is it incremental But get levels. the We every really just what don't --

with That’s very everything. helpful. and Thank good luck you

we'll question. quarter, Okay. thank the that. Good. fourth again more bit shaping reporting look chain give Thanks for to reporting able be in you the forward for joining quarter. think look We on I on is the fourth us the to little And forward everyone, supply again, a and color to And in out today. where

and for you next us, time. So see we'll joining thanks

does Thank participating. for today's conference. That conclude you

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