Q4 2019 Earnings Call

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It's such a strong foundation of excellence has placed us in a position prime for continued success, including the largest backlog today.

We continue to approach green bricks future with enthusiasm and off some optimism, but also conservative financial leverage.

We look forward to improving upon our record setting results. We saw this past quarter in here.

Please flip to slide five.

To the best markets in the country, our core markets of Dallas and Atlanta.

During the last 12 months, Dallas and Atlanta continued to be two of the largest markets in terms of generating job growth.

We also look forward to potential opportunity presented by our planned expansion into Houston.

On slide six you can see the Dallas continues to be the number one new housing market in the nation, adding about 34700 starts.

Atlanta is the fifth largest market and our challenger homes affiliates operates in Colorado Springs part of the sticks largest mark.

We are 2% to 5% of the starts in three of the largest markets and ended stage, which we believe gives us significant opportunities for growth in the coming years.

Furthermore, trophy signature homes is expected to commence operations in Houston, the second largest market at a roughly 30500 starts by the latter half of 2020.

Slide seven demonstrates what we made by a rated submarkets.

John Burns real estate consulting has published maps of our Dallas and Atlanta Metropolitan areas, where they have designated grades on submarkets of most desirable and a market through the most affordable an ETF market based on a variety of subjective factors such as quality of schools.

The limits of jobs and the existence of efforts infrastructure for quality of life.

We have taken those maps and overlaid our locations of our green brick communities with green dots.

As you can see the preponderance of our communities are in the very best a our most desirable a rated markets.

With the prior group graphs do not tell us how supply constrained lots are in these most prime locations.

Green brick owns or controls over 5600 lots in the Dallas Metroplex in over 2200 lots in Atlanta, primarily in a locations.

Over to thousands of the Dallas lots are for trophy signature Holmes, our new entry level builder and first time move up builder.

As we continued to grow a trophy brand, we expect to see our land position expand to include more affordable Submarkets, but wells, we will still maintain strip strict underwriting criteria.

At the bottom of slide seven you will also see we have 37 communities under development.

As I mentioned earlier, we were successful in achieving our community count guidance provided over the last three quarters. We ended the year with 95 active selling communities.

We opened a net of 20 new communities in the last two quarters alone.

Slide eight takes a kloepper closer look at our growth story of annual revenue and the related investment in land and land development.

And look at the chart and you can see the direct correlation between our growth and total lots owned and controlled with resulting growth in annual revenues.

Over the last 12 months, we've drawn our total revenues by 27% and our total lots owned and controlled by 11%.

I want to thank the entire green brick team for their hard work and great results Nexgen Dolsten, our president of the Texas region will discuss our growth driver and our diversification efforts.

Thanks, Jim for Enbridge is truly one of the best growth stores on a public homebuilder space take a look at slide seven titled growth drivers.

Over the last two years annual total revenues from 2017 to 2019 have grown 73%. While this growth is remarkable we believe that we've positioned ourselves through or even stronger growth in the future.

Over the last two years, our backlog grew from 120 grew 129% to 347 million as of December 30, Onest 2019.

Which more than doubles, our backlog from two years prior and is the all time record for the company.

During these last 24 months, we also increased our lots owned and controlled by 44% at grew the average number of selling communities by 59%.

Looking at our inventory growth our units under construction have grown to 1297 units, which is up 76% from the same time two years ago.

This this growth was made possible through years of rigorous land planning and underwriting which have fueled a 63% growth in annual starts over the last 24 months.

Thanks to the strong performance of our team builders. These past two years Grinberg has the backlog the construction starts the level of units under construction and the lot inventory that we believe will sustain further dynamic growth in 20 Twond.

On slide 10, we highlight the diver diversification of our product offerings over the last 24 months, we have significantly increased our focus on townhome communities. Thanks, two years of planning land acquisition and development.

In fact, we've grown our townhome revenue, 23% over this period.

Our robust single family growth of 118% in the 24 months from December 31.

2017 to December 30, Onest 2019.

As highlighted by GA chose revenue.

Revenues of $114 million over the last 12 months, which were at a lower average sales price with their more affordable age targeted product.

As a result of this product diversification, our average sales prices deep decreased by about 1% in total over the last two years.

We're extremely proud.

Over this period, we have been able to maintain affordability, while continuing to offer high quality and high quality product.

Slide 11, visually demonstrates our range of homes and diversified homebuyer mix that have grown our revenues and provided stable earnings by not concentrating on any one home buyer segment.

We now address five distinct consumer segments, which all experienced strong revenue growth into 2000 into Q4 2019.

Looking at the right side of the page you can easily see the improved diversification of our product types versus two years prior or 73% growth over the past 24 months has seen has seen an important balancing and diversification of our target customer mix.

And please remember what you saw back on slide seven most of our communities are located in desirable a sub markets. The additional mood to include different consumer segments and product types or per greenbrier its longer term strategy.

To diversify our offerings and limit risk without reliance on constantly growing sales price or a single group of homebuyers.

Next Rick Costello, our CFO, who will discuss our fourth quarter and annual results in more detail.

Thanks, Chad. Thank you all for joining us today to review, our 2019 fourth quarter in annual financial results.

Please move on to slide number 13 related to our financial highlights.

For Q4 of 19 versus Q4 of 18 and year to date comparisons here some key operational metrics.

Net new orders increased by 111% for the quarter and 38% for all of 2019.

Home deliveries increased by 35% with residential unit revenues up 30% for the quarter.

For the full year home deliveries increased by 34% with residential unit revenues up by 31%.

Year over year homes under construction or up 15% with home started on a last 12 months basis up by 24%.

The dollar value of units in backlog increased by 31% year over year like jet set to a new record.

Our EPS was a record for any quarter up 23% versus Q4 2018 in over the last 12 months EPS is now 14% higher in 2019 versus 2018.

Now for more details.

For the fourth quarter, the number of net new homeowners was 590 homes, an increase of 111% compared to the fourth quarter of 2018.

For full year 2019 versus 2018, our net new home orders have grown by 38% from 13 97 to 1923.

We saw a huge improvement in Q4 relative to prior year with absorption per active selling community that was 78% higher than Q4 of 2018, despite growing our active community count to a record of 95 communities at 12 31 19.

Greenbriar delivered a record 514 homes for the quarter, 35% more than the fourth quarter of 2018.

For full year 2019 versus 2018 Green brick delivered 1719 homes, a 34% increase over 18.

Residential units revenues were a record $223.3 million for the quarter, an increase of 30% over Q4 of 18 for the full year Greenberg's residential units revenues grew to 759.8 million up 31% over 2018.

The average sales prices of homes delivered was about 434400 for the quarter and for 37 600 for the year down 2% from Q4, 2018, and up only 1% versus all of 2018.

At 12, 31, 19 are built our operations segments had a backlog of 786 sold but unclosed homes with a total value of approximately $346.8 million.

That's an increase in value of 31% from 12 31 18.

At year end, the SP average sales price of homes in backlog was approximately 441300, a decrease of about 3% compared to the prior year.

Now, let's introduce in review some of our key growth metrics.

Regarding sales net new orders for the year were 1923.

That number of homes is up 38% from 13 97 homes from the prior year.

Regarding closings units close for the year totaled 17, 19 up 34% from the prior year.

Residential units revenues were up 31% over 2018.

For the fourth quarter Green brick had an average of 90 active selling communities a year over year increase of 18%.

For the year. All 12 months ended 12, 31 19, our average community count represented an increase of 30% on a year over year basis.

Regarding lots inventory the number of lots owned and controlled has grown to just under 9000 watts up from about 8100 loss from the year ago period for an increase of 11% at 12 31 night team and this was a company. Despite starting almost 1900 houses in 2019.

Homes under construction increased 15% to 1200 97 units at 12 31 compared to 1100 27 units as of 12 31 18.

And another key growth metric in 2019, we started 1800 89 homes versus 1500 24 homes as over the prior year end, an increase of 24% as Jed matched mentioned and this is important to future prospects for growth in revenues after so.

Regarding an average of 420 units per quarter from Q2 of 18 through Q2 of 19, we started in an average of 520 units during the past two quarters.

Our Q4 starts of 505 units represented an increase in our starts rate of 28% versus Q4 2018.

During Q4, our adjusted homebuilding gross margin declined to 22.7% for Q4 of 19 from 25.0% from Q4 of 18. This lower gross margin was driven by typical front end expenses associated with new community openings and sales incentives driven by.

Immunity specific market conditions.

That said our Q4 adjusted gross margin of 22.7% is up sequentially from our Q3 margin of 2019 of 22.2% and is consistent with our year to date gross margin of 22.4%.

Now I will talk about SGN, a leverage greenberg's SGN, a leverage has gone down year over year as we've grown and it did so again in Q4 in in full year 2019.

There are two important points to discuss point number one.

There is a line item in our income statement called change in fair value of contingent consideration.

This item is much closer to a non controlling interest expense and should not be considered part of SGN a.

This expense is directly related to the operating income and earn out payment of Ghl homes.

This item terminates.

In early 2021, it is not forecast to be significant in either 2020 or 2021.

Therefore, it is not part of our internal calculation of SGN a leverage.

Excluding this nonrecurring item our SGN a leverage as a percentage of total revenues declined for the quarter year over year from 12.4% to 12.0% and decline full year year over year from 12.9% to 12.5%.

Now the second point is that we do expect SGN, a leverage to improve as topline revenues grow and scale, we scaled our operations.

But in advance of revenues growing we make a substantial investment in our builders SDMA overhead indeed in the back half of 2019, we grew from 75 to 85 to 95 active selling communities in those two quarters.

That growth of 20 communities. In fact is a net number in reality, we opened closer to 38 communities and had 18 communities that were sold out in completed.

Yet our SGN, a operating leverage declined from 13.1% in the first half of the year to 12.0% in the last two quarters of 2019.

This decline was accomplished while still making a significant investment in trophy signature homes in the last two quarters Trophy closed their first 33 homes, but in preparation for 2020 and beyond we more than doubled trophy staff from 14% to 32 and that continues to grow.

Now, let's turn to slide 14, which demonstrates our performance measured against our peers.

The chart begins on the left side with two critical measures of pre tax income performance pre tax income takes into consideration building margins as well as operating expenses.

So you can see pre tax income as a percentage of revenues or our pretax margin.

Stands at 9.9% for the last 12 months.

This puts us far above our small cap in mid cap peers, who are at 5.6 in a 1.1% averages.

Return on revenues respectively.

A second measure of adjusted pretax income performance is based on return on invested capital.

This is the middle of the three bar charts on this page.

Again, greenberg's return of 11.0% ROI see for the last 12 months is well above the 7.9% average of our small cap peers.

And our 11.0 ROI see is almost 21% higher than the average Aro see of our mid cap peers at 9.1%.

More important as the bottom line.

And bricks EPS was a record 32 cents per share for Q4, 19 up 23% from Q4 of 18.

Our net income return on equity is shown on the three bars on the right side of chart 14.

Our our OE stands at 11.8% for the last 12 months ended 12, 31, 19, which is <unk>, 0.9% above the average our OE of our small cap peers and only 0.7% below our midcap here peers.

So let's look at that more closely look at slide 15, now for the rest of that story about return on equity.

As shown on slide 15, our return on equity has been accomplished despite keeping one of the lowest net debt to capital ratios of any public builder, we've been able to grow rapidly while increasing our financial leverage through low interest rate revolving lines of credit and now are very low long term fixed rate with prudential, 4%.

As of 12 31, 19, we have continued that gradual increase to the point, where our net debt to capital ratio, where net debt is dead minus cash has actually decreased to 28.1%.

Note that other pure builders have leveraged to an average of 38%.

But look even more closely the slide shows that all seven of the eight builders on the left side or the wrong side of the charter small cap and midcap builders, the net debt to capital ratios of those seven peers ranged from 35% to 68% for an average of 47%.

In other words, our peers are each complementing the rates of return on equity with almost 70% more financial leverage that green brick.

We believe this demonstrates that our model has the ability to deliver a significant risk adjusted Aro, we as compared to these peers.

I'll now turn the call back over to Jim who will wrap up our part of the call prior to opening things up for M&A Jim.

Thanks, Rick.

Our team builders to the great job of managing pace versus price to generate the best quarter and our history for net income total revenues and residential units revenue.

Operationally, we are seeing house margins stabilize and the benefits for our standardize operating systems utilized by all of our builders.

Our businesses now scaled to where we expect or title and mortgage business to expand rapidly.

And profitably with little risk.

With 2020, well underway, we are eager to build upon or many accomplishments of the past year.

Additionally, we anticipate further diversification of our business through that continued growth of our trophy signatures brand, which we'll see its first entry level homes closed in Houston sometime later this year.

We generally do not comment on monthly sales before quarterly results are filed.

However, the reaction of the stock market to recent headlines deserves comment.

On a unit basis, we had our best January sales on a record which was followed by record February sales.

At the same time, we remain adamant that our future growth will not be obtained at the cost of undue risk.

With one of the lowest leveraged balance sheets in the industry. We continue to believe that our strategy of prudent.

Organic growth is ability to produce superior risk adjusted earnings growth.

I want to thank the entire green brick team for their hard work and great results I'll now turn the call back over the operator.

At this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press the pound, we'll pause for just a moment to compile the culinary roster.

And your first question comes from Michael the half with JP Morgan. Please go ahead.

Hi, This is actually Maggie on for Mike Congrats on the quarter.

Larry.

Obviously sales pacing order growth was extremely strong.

Could you comment on that if any specific builders.

Sure.

Or product lines.

The strength for us it was pretty standard across the board.

And also if you could comment on pricing power incentives odd incentive trends that you saw during the quarter.

Looking for do you have any plans to begin pushing price overpays, Sir do you kind of anticipate this.

Stronger pace to continue.

Okay. This is Jim I'll, let me take the first part of your question.

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We saw us really significant growth in all of our Dallas builders and brands Southgate is the highest price point, bill and Thats kind of held its own but our townhouse business is just gang busters right now in Dallas.

All of our business are doing well trophy is off to a much better start than we expected we don't typically break down.

Results by builders, but I can tell you that were just thrilled with the market reception to the trophy.

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Product in branding that we're doing.

The only slow part for any of you that follow weather forecasts Atlanta has had record rains ahead 20 inches of rain in February that's the only builder that is really off pace and we're really thinking that the weather had its really significant impact them on their results agenda, you want to talk about.

Pace versus price yeah, we're seeing that we are raising prices and we're also tightening incentives.

I think as an industry, we're probably going to see some lumber increases and conquered increases in near future, but we think those will be more than offset by.

The lack of one or the tightening of incentives and higher prices.

Got it.

Thank you.

Ooh surpass your goal.

92 active communities by the end of the corridor.

I was wondering if you could give us any sense of how much growth we could expect.

During 2020, especially given that you are expanding until that the Houston market.

We don't forecast Ricky might want to comment is to really our future community growth, but I think that one important.

Differentiator that.

We really have a strategic advantage on is it in all the markets were operating in we've been there or our partners had been their team partners and builders have been there 10, 2030, 40 years and we've been developing lots and we really are very good at finding lots and I think that.

In the next few quarters, you're going to see that the ability to develop lots.

Is going to become increasingly important for builders and thats, taking it from the entitlement through the land development process and we think we really have a strategic advantage over any appear in doing that.

Rick you want us okay.

Yes.

We are we're not quite ready at this time too.

Project.

But profound number like we did last year.

Well, let a little bit more the year open up before we consider that but generally speaking, we'll just let our record stand right now.

Okay. Thank you.

Thank you would like to ask a question. Please press Star then the number one on your telephone.

Your next question comes from Kyle Carl Reichardt with BTG. Please go ahead.

Thanks, Hi, guys, if you will.

I got a couple three for you here on one was just on you talked gave a lot of helpful detail in as Ginny can you talk a little bit about the the gross margin outlook, you've got pricing you think it will will overcome some input cost increases.

Your mix is also should things slightly more downstream.

We know store count coming up so just give me a sense as to you the backlog now and what you're expecting to sell in 20 sort of how do you feel that margins are likely to trend to be seen the bottom here or is it still likely to be building more pressure on gross margin.

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This is Jim and take that in a few parts first of all I think investors need to recognize we have some of the highest margins in the industry right now we don't see degradation in the margins.

Trophy signature homes, which is more key to an entry level builder is having consistent margins with the rest of our builders. Despite many of their margin taking place on.

Optioned lots and having faster inventory turns which implies a higher return on capital so.

Since our gross margins, we see keeping the same so but we think return on capital could improve because of faster inventory turns.

Okay. So thats, how they had been just to clarify Jim what you said before choppy signatures performing better than you expected is that a reference to sales base your ability to open stores pricing power what are the the drivers of better better than expected for you.

It's really everything with their sales or fashion, we expected their margins are equal or better than we expected and really one of the most exciting things is.

Yes.

Around town, we are attracting some of the best talent to join trophy signature homes because everybody in town is just amazed at the rapid and successful start so at the end of day. It's a lot about people not just about capital and we think they really are putting a fantastic team in place over there.

Okay. That's helpful. Thank you for that and then a couple of more acute dosed me.

Do you did talk little bit about the land market on a go forward basis. So we figure adoption shipped on on Trophy you grew lots, 40% over the last couple of years, but your your your sales pace. Your orders sales have grown a lot faster. So when you look you've noticed I noticed in the side you mentioned a slight increase in debt to cap. So how are you thinking about.

With a landmark it looks like now the focus for potential new markets versus investing in your current markets and what prices look like as we see builders. Many builders as you noted scrambling for lots in a variety of markets Im let Jeff take a part of the question, but one of things I want to highlight that investors really don't see because it's not.

Very transparent and when they look at green brick and other builders in in that we don't do any off balance sheet land banking transactions were to make our balance sheet look light and land light that we are giving land bankers almost equity returns to bank or lots.

Jed we you take the rest of the question in terms of what our future looks like and keeping a lot supply.

Yeah. I mean, we are seeing you know I a high demand for lots across.

Across all our.

Geographies.

We as you know girl have quite a few lots already under control. So we're in a pretty good position.

And I think the market for the most for we're seeing that we're seeing kind of a surge in a location lot prices, but.

On the kind of entry level price points I think we're we're seeing more modest increases.

So we feel good about it but we can see.

The others that may not have plan as well would be struggling right now.

Okay, and I understand that.

And then two more just one.

On Trophy signature and you mentioned the closings you've got so far can you give a sense of roughly maybe what percentage of your open communities at the end of 20 trophy signature might be.

It was it was officially 10 out of a 95 at year end.

And growing.

So you think thats share will grow Rick spending in 21 solution or 20, yes, 20 years at twin Okay. Okay, and last question and I'm sorry to ask this but I do have to ask it can you can you give me a sense over the last week, obviously, there's been an enormous change intent to the 10 year treasury yield mortgage rates a lot of chatter and then of course, we have criminal by risk sharing.

People as well so there's the tension between the two can you maybe comment over the last week or so if you've seen the positive impact from rates were negative impact from criminal buyers on just traffic to the communities.

Yes, it's been very interesting.

It's almost like we're living in an alternative universe from looking at the headlines.

Obviously among.

Build or not a doctor.

But we constantly look at the data and the context of things matter first of all our sales and traffic we discussed all of our website analytics Oliver foot traffic results on Sunday.

They actually increased.

Year over year and over the prior week, despite all the headlines.

I can't tell you whether it's the.

Historically low interest rates that drove people to get off the sidelines and start looking at homes, but.

We are not seeing a decline I can't predict how this is going to play out in the future, but our backlog is continues to grow.

We're operating more efficiently.

We don't buy a lot of products from China or.

That part of the world like our all of our appliances shifted to whirlpool, a few quarters ago to reduce our exposure. There. So we feel good about that.

In terms of context.

Carl I know, you like numbers and I like numbers and I.

I was looking at.

Really what is going on I'm, not a doctor but.

The American cancer Society said that.

There were 1.8 million new cases of cancer last year, and 606000 people die this year from cancer.

840000 people died from heart attacks.

40000 or killed in car Rex 40000 by guns.

I think the reaction to this is probably.

Good to be aware volleys problems, but boy, it's really been quite a reaction that.

We will be interested to see how it really plays out when we look backward at this two years from now.

Hey, Carl this is the ceramic.

Thanks for joining the call.

Specifically on points here question, we've had nine weeks this year and if I look at the average weekly sales rate and then compare it to the week that just ended at the end today Monday.

This last week of sales was 35% higher than the entire nine week period.

Okay people are buying houses it reminds me of 2001 after 911.

When the fed was being accommodative.

And people started to turn to housing and nesting instead of traveling it's that's maybe not the same situation, but it certainly we might be seeing history right, but that was.

Very impressive we thought that that people were not just kicking tires, there were a buyers out there.

The decline in treasury rates hasn't been fully reflected in long term rates long term rates have moved and eightth two a quarter.

Not.

I have 2% like.

Short like the Treasury rates and that's still significant when you started three and half percent lingered on a quarter you're picking up your looked that part of your mortgage payments going on on was 7% so significant it's not.

The same reductions we've seen a treasury rates, but we're thankful for.

Okay, guys that is really really helpful color and I really appreciate it thanks very much.

Thanks Carl.

As a reminder, ask a question. Please press star one on your telephone will cost or one moment to pile any remaining questions.

We do other question from Aaron tax with JMP Securities. Please go ahead.

Hey, guys. Thanks for having me on today appreciate it.

All right. Thanks. Thanks.

Couple of questions here, starting with the return on equity profile, you guys talked about peers, having higher leverage and that being a benefit on that metric.

I think you said you take your leverage up to around 35% and obviously the peers are still higher so how did you come to that 35% level and do you think you may take it up higher if you don't get the desired results out of moving up to 35%.

This is Jim.

No, we're not taking and above 35% because I think as we grow our business.

We're going to get increased return on equities from SG in a leverage we hope to get about 1% there, 1% from our tideland mortgage business and 1% from our.

Increased efficiency, it or builder level.

And.

35% was picked because we started this for a long time, if we went and business. We saw that every company that.

Had a favorable capital structure like this in a downturn came on stronger on the back side and we always want to be able to come out stronger on the back side of any kind of market correction. So we're going to maintain our discipline. We think we can make really nice returns with that discipline and.

And thats not changing.

Gotcha and then in terms of the increased operating efficiencies at the builder level, what does that really mean or entail any kind of clarity you can give me there.

Yes.

Yeah. So obviously you know a lot of our builders have reached a kind of targeted growth.

Right as far as the how many homes that are produced in a year and so that the SGN. A has now stabilized we're not having to higher up to produce future results now with trophy growing like it is we are but our other builders.

I've had more modest growth over the past 12 months, Aaron what I think jet, saying as weve right sized our builders organizations to match the revenues now for the most bark with exception of trophy this rapidly growing.

Okay and no change in terms of.

How you finance lots or anything like that change the option profile to get that our OE. It's it's more just ramp in the size of the individual organization.

Well, we're looking at all kinds of alternatives all the time you know whether its.

Side by side, even partner in Dubai, and buying land with us, but right now.

We're just doing what we've always done.

And I think if you've looked at lots owned and controlled as a measure of that one thing Thats a little Cork in our numbers right. Now is we're showing I will.

A lower percentage zone, but there's a.

Land joint venture that's disclosed in the footnotes to our financial statements were.

We don't consolidated its called East Jones Bridge in Atlanta, and in that deal we have options for.

About 560 lots. So those are counted in lots controlled under an option deal that were really if.

50, 50, JV partner on and for all intents and purposes. There in parentheses owned so if it wasn't for that you'd be seeing that number more like around 75% or so.

And it really is is not a function of any change in strategy. We have picked up additional option lots for for trophy, but in many cases, that's the existing phase where the second phase we're going to be the developer of our second and third phase in some of those communities.

Okay. Yeah. That's helpful. Appreciate it and that's all my questions.

Yeah. Thanks for joining the call appreciate it.

Your next question comes from Matt Damon Titan Capital Management. Please go ahead.

Thank you I was hoping to.

Press, a little deeper into the financial services I was curious how much room for growth and profitability contribution you see from that segment of your business here going forward.

And how longer runway is going to be a for a real contributor to earnings growth.

Hi, This is Jeff ill take that question. So on our title business, we only started and.

Dallas was off for 2019 Dallas was on title all year, We got Atlanta started in late Q4, so you'll see a lot of title business Atlanta flowing through the 2020 numbers that wasn't there in 2019.

On the mortgage front we.

Same kind of deal Atlanta, or Dallas was on.

Our mortgage platform all last year Atlanta was on it for pardon for only part of the year.

Additionally, we think we'll see.

30 bip improvement over.

Yes, 30, Bips improvement in our margins our mortgage business. So.

We think that once we do that we're you know kind of stabilized for awhile.

In terms of profit, we're looking title in mortgage in the $4 million to $5 million range.

And.

That's a nice number it's a very low risk business and just taking look at our total interest costs. It's just the financial services platform. That's an ongoing revenue stream contributes about a third of our interest costs.

And we like that to.

And does the financial services piece of the business. There does that also player were where there are geared to your Cho in challenger and.

Is there a strategy to roll that out with those partners as well.

Doesn't challenger Challenger has its own mortgage joint venture our results are.

And on an equity return on our income statement, where it's not broken out in terms of revenues in terms of ghl about half of their buyers are cash buyers.

It's a move down or last home purchase and so a mortgage operation is not as profitable there because.

Just so many other buyers are cash the good news is so many buyers are cash their low risk contracts.

Great. That's helpful and I would just I would just add that as we grow trophy and we start issuing more.

Our financial services stars.

Issuing more mortgages that are government backed as opposed to conventional we should also see more profitability off of those mortgages.

Yeah. We're currently no further questions at this time I'll turn the call that can management for closing remarks.

Okay. Thank everybody today for joining the call.

And we hope to report positive Q1 results in a couple of months.

Good day.

This concludes today's conference call. Thank you for Chinese you may now disconnect.

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