Q1 2020 Earnings Call
[music].
First quarter earnings conference call at this time, all participants I know listen only mode. After the speaker's remarks, there will be a question and answer session to ask a question doing just that shouldn't be lucky to press star one I need to balance out if you wish to live yourself on the key piece that's the town.
If you acquire any further with the since he started that rail. Thank you I would now like turn the conference over to your host. This is still quake set deployed the life.
Thank you thanks for joining us today, joining me on the call on various locations today about schottenstein, our CEO and president.
Tom Mason NBP, Derek Klutch President of our mortgage company Anne Marie Hunker, VP, corporate controller, and Kevin Hake Senior VP.
First you addressed regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material. During this call because we are prohibited from discussing significant non public items with few directly.
I'd ask you forward looking statements I want to remind everyone that the cautionary language about forward looking statements contained in todays press release also applies to any comments made during this call including comments related to Kogut 19 also be advised that the company undertakes no obligation to.
Well they any forward looking statements made during this call also during this call we disclose certain non-GAAP financial measures.
Presentation of the most directly comparable financial measures calculated in accordance with gap and a reconciliation of the differences between the non-GAAP financial measure and they get measure which was included in our earnings release issued earlier today that is available on our website.
With that I'll turn the call over to Bob. Thank you Phil Good afternoon, and thank you all for joining us to review our first quarter results.
We had an outstanding first quarter highlighted by record income record revenue record deliveries record new contracts and record backlog.
However, as we report our results today, we all know that the world is dramatically different now than it was for most of the first quarter.
And we're all continuing to grapple with the effects of the cobot 19 pandemic flu.
Both in terms of the widespread illness and loss of life that are impacting so many throughout our country as well as the severe financial effects caused by a substantial shutdown of our economy.
This is a time unlike anything we've ever faced.
And since early March our primary concern has been and continues to be the health and wellbeing of our employees trade partners customers and their families.
We're closely monitoring updates for the CDC, along with guidance from state local and federal authorities.
Continually adapting our operations and business the safeguard our employees customers and work environments.
Today, the vast majority of our employees are operating remotely.
All of practicing appropriate distances.
At the same time, we're doing everything we can as a company to safely continue selling building and delivering homes.
In order to operate.
And to continue to operate in the current environment, we are leveraging our existing digital platform and tools and continuing to use creative ways to interact with our customers as well as our business partners.
Homebuilding and mortgage services have been designated as essential in all of our markets with the exception of Detroit.
Detroit accounted for slightly less than 5% of our business.
So most of our communities greater than 95%.
And our sales and construction efforts there remain open for business.
That said, where we are open our operations are constrained.
Our sales offices are now open by appointment only.
So far this has been a somewhat effective method of selling but clearly our business has been impacted as there has been a marked decline in foot traffic and sales since the last half of March.
Having said that we are encouraged by the fact that as most of our markets.
Our online traffic, particularly since mid March has increased significantly year over year.
Our success and cultivating online leads and converting them to appointments as a critically important part of our operations and has been for some time. This is something that we give great focus to day in day out.
At the beginning of the year housing conditions were very good as good as we've seen over the long time.
And we enter 2020 with tremendous operating momentum.
As Phil will discuss shortly we had record setting sales about January and February and up until mid March that trend continue.
As noted in this mornings release, the Copas 19 pandemic first began to impact our business in the second half of March.
Traffic declined or cancellation rate increased to 28%.
Resulting in our new contracts being down roughly 50%.
For the last half of March compared to prior year levels.
In recent weeks, we've seen a slight but noticeable improvement in conditions, reflecting the improvements as the so called flattening of the pandemic curve and the early stages of returned to work for select businesses in select markets, specifically, our new contracts.
For the first three weeks of April have improved.
Aided by a slight decline in the cancellation rate.
Specifically.
April month to date, new contracts are roughly 35% below the prior year level.
Because of the unknown unknown overall effects of an economic slowdown on homebuyer demand.
We have taken a number of measures to extended or delay a significant number of our land purchases and lot takedowns across our markets in the few cases, we've actually terminated contracts.
We've also pulled back on our pace of land development to align with our expected needs.
We will continue to monitor market conditions, and our pace of home sales and deliveries and we'll adjust our land and related overhead spend accordingly.
In a similar fashion, we also quickly pulled back on starting the construction of new inventory or so called spec homes that are not subject to a purchase contract.
We will continue moving forward to be very selective in starting these inventory homes.
Overall, it's safe to say that we're managing very carefully leaning on the extensive experience of our management teams in each of our markets to continue to execute and move forward in these unprecedented times.
Now I'll mention just a few highlights of our first quarter results before turning it over to Phil who will describe them in more detail.
As I mentioned at the outset, we had many records we achieved first record first quarter revenue of $578 million, an increase of 20% from last year's first quarter, driven by first quarter record level of 1495 home closings during the quarter. This was.
26% better than a year ago.
Pre tax income for the quarter was 76 better than a year ago and net income for the quarter increased by 79%.
Our diluted earnings per share increased to one dollar nine compared to 63 cents per share last year.
We have continued to expand our most affordably priced smart series line of homes.
Which has been very successful for us in achieving both above average pace and above average margin.
At the ended the quarter, our smart series homes were offered 63 of our active communities or 28% of total EMI communities and that comprise that represents all 15 of our markets and aggregates, 30% of our total sales reported during the first quarter.
Companywide.
Our backlog sales value with the ended the quarter was an all time record $1.3 billion units in backlog were up 23% to a quarterly record of 3265 homes, while the average sale price of backlog was relatively flat down 1% due to.
We're shifts in mix and the impact of our smart series communities.
Importantly, our balance sheet and liquidity remained very strong we ended the quarter with shareholders equity in excess of a billion dollars and a very healthy homebuilding debt to capital ratio of 39% down significantly from 47% at the end of the first quarter a year ago.
I will wrap up my comments by expression by expressing my deep appreciation for all our employees in our management teams across our divisions for their perseverance and capabilities in meeting this century situation head on and for their dedication and resilience.
Yes.
We entered this crisis in the best shape in company history.
And as I previously mentioned was significant operating momentum I.
I have every confidence that we will get through this and emerge as an even stronger and better homebuilding company.
With that I'll turn it over to Phil Thanks, Bob New contracts for the first quarter increased 27% to 2089, an all time quarterly record compared to 1644 for last year's first quarter and our sales pace per community improved to 3.1 per month in the first quarter.
2.6 in quarter, one last year, our new contracts were up 66% in January up 58% in February and down 17% in March in the second half of March our new contracts were down 50% and for the first three weeks of April our new contract.
Were down 35%.
Our cancellation rate was 28% for the last half of March and 26% for the first three weeks of April as to our buyer profile about 50% of our first quarter sales were the first time buyers compared to 49% in last year's fourth quarter and about 50% of our first.
Order sales were inventory homes compared to 44% in last year's fourth quarter. Our community count was to 23 at the end of the first quarter up 4% versus 2019 first quarter and the breakdown by region is 98 in the northern region and 125 in the southern region.
During the quarter, we opened 17, new communities, while closing 19 due to the uncertainty of the current environment. We are withdrawing our previous estimate and not providing estimated information for the remainder of the year.
We delivered a first quarter record of 1495 homes in the first quarter.
Delivering 56% of our backlog compared to 54% a year ago.
Revenue increased 20% in the first quarter, reaching in first quarter record a 578 million.
Our average closing price for the first quarter was 374000, a 5% decrease when compared to last year's first quarter average closing price of 393000, and our backlog sale price is 399000 down 1% from a year ago, and our backlog average sale price of our Sir.
Mart share each product is 305000, our first quarter margin was 20.2%.
90 basis points year over year, and up 100 basis points from last year's fourth quarter and our construction in labor costs were flat when compared to last year's first quarter. Our first quarter SGN expenses were 12.2, a revenue improving 70 basis points compared to 12.9, a year ago roughly.
Shifting grading operating leverage.
Interest expense decreased $2.1 billion for the quarter compared to last year interest incurred for the quarter was 11.9 million compared to 12.9 million a year ago and the decreasing interest is due to lower outstanding borrowings in the first quarter as well as a lower weighted average borrowing rate.
And during the quarter, we generated 59 million in EBITDA compared to 40 million in last year's first quarter. We at 22 million of capitalized interest on our balance sheet at is about 1% of our total assets and our effective tax rate was 23% in the first quarter compared to 25 per se.
And last year's first quarter, our first quarter rate benefited from energy tax credits and we currently estimate our annual effective rate for 2020 to be around 24%.
Our earnings per diluted share for the quarter increased to one on nine for share from 63 cents per share last year and during the first quarter of this year, we repurchased $2 million of our outstanding shares now Derek Klutch will address our mortgage company results. Thanks, Phil we have a strong adoption.
His team in our mortgage and title operations across our markets and they've already stepped up to serve our customers with care in this challenging environment.
Technology, we invested in over the past few years is allowing us to work remotely from one application throughout the entire mortgage process and we implemented some changes to allow us to conduct conduct closings, while maintaining social distancing guidelines.
First quarter pre tax income for financial services was $5.6 million, a 14% increase compared to 2000 Nineteens first quarter.
Revenue was also up 14% to $13.5 million due to a higher volume of loans closed and sold.
Our results were impacted by a reduction in the value of our mortgage servicing rights in margins caused by the disruption in the mortgage market.
The loan to value on our mortgages for the first quarter was 84% in 2020 up slightly from 82% in 2019 is first quarter.
72% of the loans closed in the quarter were conventional and 28% or FHLB or BA and this compares to 76% and 24% respectively in 2019 first quarter.
Our average mortgage amount decreased to $306000 in 2021st quarter compared to $315000 last year.
Originations increased to a first quarter record of 1131 loans and the volume of loans sold increased by 16%.
For the quarter the average borrower credit score on mortgages originated by on my financial was 741 down from 744 last quarter.
Our mortgage operation captured about 85% of our business in the first quarter, a significant increase from 79% last year.
We maintain two separate mortgage warehouse credit facilities, which provide us with funding for our mortgage originations prior to the sale to investors.
At March 31st we had $105 million outstanding under the am I off warehousing agreements, which is a $125 million commitment that expires in June of 2020.
And we also had $40 million outstanding under a separate $65 million repo facility, which expires in October of this year.
Both facilities are typical 364 day mortgage warehouse lines that we extend annually.
We are working with our lenders on the warehousing agreement that expires in June and we expect approval and closing in May.
With that I'll turn the call back to Phil Thanks, Eric as far as the balance sheet summary, our financial condition continues to be strong with 1 billion in equity homebuilding debt to cap ratio up 39% and 448 million of available liquidity at quarter end.
We are carefully monitoring our cash and expenses as always along with our balance sheet total home building inventory at March 31, 20 was 1.8 billion an increase of 92 million above last year and our unsold land investment in March 30, Onest is 809 million compared.
To 796 million a year ago at March 31, we had 396 million of raw land and land under development and $413 million finished unsold lots. We owned 5169 unsold finished lots with an average cost of 80000 per lot.
And this average lot cost is 20% over 399000 dollar backlog average sale price. Our goal is to maintain about a one year supply it finished lots and to own a two to three year supply.
Lots owned and controlled as of March 31 totaled more than 33800 loss 14800, which were owned and 19000 under contract we own 6800 loss in our northern region.
And 8000 lots in our southern region, a year ago, we own 14500 lots and controlled in the National 13500 lots for a total of 28000 lots the increase in controlled lots is due primarily to additional positions for our smart share each product.
And during 2021st quarter, we spent 76 million on land purchases and 62 million on land development for a total of 138 million and about 45% of the purchase amount was for raw land, we're carefully monitoring our land spend and due to the uncertainty of the current end buyer.
But we are withdrawing our previous estimate and not providing an estimate for the year and at the end of the quarter. We had 556 completed inventory homes, which is about two per community and 1322 total inventory homes and of the total inventory 582.
Northern region is 740 or in the southern region.
At March 31, 19, we had 560 completed inventory homes and 1207 eight total inventory homes. This completes our presentation, we'll now open the call for any questions or comments.
Thank you Sir.
At this time I would likely might also be.
Yes, hi been number one and your telephone keypad. Okay. One last quick question I guess, so I have been the number one I know telephone keypad.
This does it sounds from the Q piece that.
Well, let's look at the moment.
All right. Thanks.
Alright, well first question will come from the line of Arlington Rob.
Thanks.
Good day, ladies on line. Please proceed.
Hey, guys. Good afternoon have glad to hear everyone's doing okay. Yeah, hopefully everyone in the company as well and thank you for all the a the great detail as always.
Thanks, Alan same to you.
So.
Do you see the April results are encouraging I think we're seeing a similar momentum from other builders said that have reported over the last few days I'm curious if you can maybe just talk a little bit about where you're seeing that improving demand and just kind of thinking about your portfolio, both geographically as well as product type.
One of the things that seem to be benefiting right. Now is is a spec inventory you're seeing a lot less competition on the resale side. So I'm curious you know as buyers are coming in and buying houses today.
That being skewed more towards spec inventory than perhaps you know it had been leading up to this a pandemic here and you mentioned kind of curtailing. The and then you spec starts but are you are you planning I kind of shifting the mix of your business between spec and to be built going forward, just given that the risk profile on and dynamics in the market.
Let me try and answer those questions I think that with a few exceptions.
The increased.
Sales velocity, obviously nowhere near where we'd like it to be but certainly better than it was as you've noted.
We've seen that in quite a number of our 15 markets.
Exceptions would be Detroit, which has effectively been close.
I think things have been a little slower in Florida, very honestly and I were particularly those Orlando.
Clearly.
The the significant furloughing of employees a Disney has a has created a little bit of a cloud over that market I'm not as not not as robust or grow buses the wrong word, but probably not as good as you'd expect it to otherwise be in this environment I think the Empire.
Back there's been a little greater.
I think Dallas is a little bit for us of a bright spot.
Appears to be holding up may be even comparatively better than some of the other markets, but you know we're seeing good activity in Columbus, and Indianapolis, and Minneapolis, and Chicago, We've got pretty good results Austin. So I think that the uptick is been has been pretty well.
I'll shared I'm, calling out maybe Orlando in the one hand, and err on the low end to and Dallas on on the on the higher end as far as specs goes.
I think your points is an interesting one.
Broadly speaking I.
I think we're in really good shape in terms of our spec inventory.
That said given you know given where we are in our.
Maybe slightly more optimistic than a few weeks ago outlook on the year.
It is we manage the business subdivision by subdivision not not only is every market different but within markets communities tend to have their differences in some cases significant.
We will be very carefully looking at it all of our communities within each market and.
It's possible that we could be increasing our spec inventory, where we think that makes sense to do so.
Got it and that's all very helpful. So thank you for that.
Second question you know you gave some great data on the mortgage side of the business. Some you know we've heard obviously the tightening that's been going on in the market and it would seem like just based on your average is you are not being overly impacted by that but I don't know. It then it's fine you can provide some color just in terms of what tightening have you seen in terms.
Maybe overlays are FICO scores anything that is limiting your ability to get loans done and roughly what percentage of either your backlog or your your orders. However, you want to think about it I would those overlay supply too.
Yeah sure elements of Derek Yes, I'm in the industry is definitely tightened the credit standards, but credit score and DTR ratios on one thing to keep in mind, though is the investors have raise minimum credit scores on purchasing government loans, but FHLB and be a have not raised credit score. So they will.
To ensure them, we've just had to kind of modify how we're selling the government loans and who were selling them too, but we have not had any restrictions on being able to deliver the government loans.
As far as percentages, our average credit score I mentioned is you know about a 740 plus credit score over 75% of the loans that we do our above 700 credit score and only about 10% a little more than 10% or below a 680 credit score.
So in the Big scheme of things, we haven't really had much of a negative effect due to the tightening.
That's great and when you mentioned kind of changing how you sell the loans do you sell directly to Ginnie Mae and Fannie and Freddie in those situations, where you're maybe bypassing the investors that are instituting those overlays.
We do have the ability to sell directly to the agencies to operate the Ginnie Fannie and Freddie either on a servicing released or servicing retained basis.
Got it alright, well great guys. Thank you very much and good luck in stay safe.
Yeah, you to act Alan.
Well.
Jay next question will come from the line that are exploring what can happen. We thank you [laughter].
Yeah. Thanks, guys.
Hope you guys are all well.
I wanted to ask about.
Bill Times, you know have you seen any noticeable.
Extension of Bill times because of.
Labor constraints or social dispensing no. That's my first question.
Alex This is Phil or not really I mean every market has a challenge here and there with some products and you know theres, a little probably somewhere in there, but as far as far as overall not really any significant changes.
Okay, that's good to hear and how about on the incentives front.
Have have you guys seem and an increase in the level of incentive fee pets to offer under the current circumstances or or felt more competition from other.
Other builders that you have to try to match.
You know Alex that's always a subdivision by subdivision type question you know in general are not really.
You know we have been selling you know a a few more specs the last few weeks.
In the comments I made were about 50% inventory homes in the first quarter, that's moved up to that 50, 560% range, but that kind of moves now and then theres always kind of some incentives on maybe some older spec inventory, but Ah you know overall not really be chain.
Yes.
Okay, Great and last question you know what can you guys need to.
Here feel or what are you looking forward to maybe reengage on the land side and on opening new communities.
We have not disengage don't a land side by any measure or and I know I don't think you meant to imply that nor have we walked away from opening any new communities, what we have done and it's.
Deal by deal and we have many many deals throughout our 15 divisions. This we thoroughly analyze each one and much of this work was done about a month ago. When we were the very early innings of this.
Pandemic.
And then reviewing those deals.
Our our belief was and I suspect that was widely shared by a lot of our competitors.
Is that.
We need more time and did that we knew we would know more than 30 60 or 90 days that we knew now.
So where we had negotiated the right to do so by virtue of the contracts that were in place.
As you know most of our land is under control and not yet owned.
We went back to sellers indoor developers and Dan or on a deal by deal basis didn't do it on every deal we were able to do it.
The good number of them, we're able to secure more time, either time to decide whether or not to sign off on a contingency period time to close.
Whatever stage the contract might have been in there's been very few deals that we've actually walk from.
And there are quite a few that we have actually closed on during the last 30 days because after having gone through that very exhaustive process. We made the decision that it absolutely made sense to do so because of the price the product the price point.
Off the market, although sort of things.
As far as new community openings, just to reiterate what I said.
We have opened a number of new communities. This year and we have plans to open quite a few more throughout the course of the year. Phil I don't know if you want to add anything more on the new community side and the only all that in general Bob says if you look at you know on loss were only up about 300 watch where we were a year.
Our ago and if you look at total unsold inventory were only up about 3%, even though our first quarter volume was quite a bit higher than a year ago. So we think we've done a pretty good job managing those investment levels and we will continue to.
Great well I wish him the best friends brings great. Thank you.
Thanks, a lot of San viewing.
Thank you and your next question will come from the line of let's say they Cameron from my past 50 <unk>.
Hey, good afternoon, guys. Thank you for taking my questions.
[noise] Jay Yeah. My first question just stand on land for a minute and if you think about what you've walked away from what you're trying to acquire now.
Is this an opportunity maybe for you guys to get deeper in smart series or deeper into some more affordable product.
You know.
I'm not really wasn't into our thinking that maybe that may happen.
We've continued to grow smart series.
To the point, where it's now but as you know 30% of first quarter business pretty close to what we projected to be you know 90, 880 days ago I suspect. It will continue to grow you know somewhere between 30 and 40% of the business. We've got a great business, it's not smart too.
That that is very successful for us as far as our thinking on land.
It's been Diddley a win win this health crisis came upon us we pivoted quite quickly two from almost full time offence as a company to significant defense not full time defense, though.
Whether we remain 10% or 15% offensive you know we wanted to keep a very quick careful eye on just how bad things might get but we also knew there would still be some opportunities out there and as I've mentioned in response to the last question. We have closed on quite a number of land deals.
Over the last 30 days and are very glad that we have not just because things have gotten slightly better and we think that you know the there probably will continue to get a little bit better with each passing several weeks, but because those deals made sense.
They're the right thing for us and they were negotiated in ways that we think will produce very good results.
Even with the deals that we cancel them. There's been a few is we look out over the next 12 to 24 months.
We're very bullish on our business.
We're very bullish on homebuilding as an industry.
I think that there could be.
An unintended baby, but nonetheless positive tailwind to homeownership rates coming out of this crisis, even if there isn't.
We think that a lot of just and you probably heard this from so many other builders and I think it's widely viewed the macro fundamentals.
Point, most point to the right direction for improved.
Housing conditions over the next several years and we're poised to grow.
We haven't cutback on our growth goals you know, we'll see how this year. It turns out we were poised to have another record year. This year. This obviously has caused a pause in that thinking depending upon how quickly we can emerge from this.
We'll have a better feel for but the land that we own and that we have under our control give us the ability to reengage very effectively with our growth goals as we begin to see more light at the end of the tunnel coming on this crisis and have a better feel for what.
With the recovery will look like.
I'm a whole lot more optimistic now than it was a month ago.
I don't think we're being silly I think we're being smart and I think that.
Like I said I really believe in homebuilding I always have but I really believe Anna and I think that the homeownership rates going to be positively impacted from this and we all know even at that rate goes up just a quarter percent or half a percent that's a lot more households living in the home in there.
It's a small fraction of them choose to buy rather than by new rather than by used that's a good tailwinds for our industry and we.
We expect to get our fair share.
Yeah I agree April 29 for whatever reason feels a lot better than March 29 stood.
I guess my second question on on the same line.
Thinking forward to maybe some some people whose credit needle fixing up or down a little more time to actually become homeowners have has any of what you've seen the last two months, maybe pushed you in the direction of doing some some single family build for around for partnering up with a single family rental.
As a nation to help keep your volumes if things 40 gets a little bit slower from here.
No [laughter].
It's a great question, but.
For all the reasons that we've been saying in response to that question. I know you know I know other builders look at it differently and that's what makes it an interesting game.
But.
We think we can put a lot of points of the board doing what we're doing we haven't put a lot of points on the board.
My guess is we would have had some of the strongest sales comps in the industry before March 15th and you know we will we've got a lot of confidence that we've got the right strategy and the right focus and.
And as far as a credit impaired buyers, we do a lot with that now to try to get them into our product as a buyer at something we've been focused on for almost two years with.
Internally, we call. It are welcome home club, but that's that's that's that's a part of the on my financial operation.
Uh huh.
And then maybe too early to ask this question, but but here goes anyway.
Seeing an increase in.
Potential private builders for sale or.
The opportunity to expand and and if you were to do so would you look to grow and some new markets or expand out where where you have a footprint now.
I I personally I'm not aware of of anybody who's on the blogs, it's pretty hard to.
For me I guess, just reacting to your question to think about that at this moment, but we would like to be an additional markets.
We have flirted with opening in one or two over the last six nine months haven't been able to find the right deal but.
We'll be back at that we'll be back at that kind of thinking sooner than later I hope because that would mean that were closer to the all clearsign you know we.
We want to continue to be prudent from a balance sheet standpoint for the near term.
Even though we've got a tremendous amount of liquidity and our public debt. The nearest maturity isn't until 2025. So we're in great shape from a balance sheet standpoint, certainly could do something if the right opportunity presented itself, but we'd want to make sure. We had a lot of day light on the on what.
The.
Long term impact is of this current situation.
Got it.
And then the so the last one for me.
So nice improvement in the cancellation from second half March to the beginning of April.
Could you talk about how many homes actually have cancelled in April and May be also some builders have given out of staff, where they talk about what the cancellations looked like it looked like as a percentage of the beginning backlog would you I'll be able to give me that stat as well.
You know Jay there's a.
A lot of different ways to kind of fat I mean, we analyze cancellations very carefully as far as at what point in the process are they coming from.
A big part of our cancellations continue to come before the houses are started.
The part this kind of moved up a little bit is that even though about 90% of the people that are scheduled to close are still closing and normally those closings are all scheduled you know two three weeks prior to the closing date. So the good news is 90% or so other people are closing we are.
Paying a few more people cancel.
Right at the pre closing process and again that gets back to Bob's comments about being careful on on starting you know specs up you know the last couple of years, our can it's been in that 10% to 15% range. So it's obviously been a little higher than that I mean, we have a record backlog of over 3000.
In units, but the way we try to approach it is where we're constantly scrapping our backlog we're trying to be very careful as far as we do not have many you know houses to sale contingency in our backlog. So we tried to be careful with that and make sure our backlog is through the process but.
You know.
The good news is it is coming down a little bit and that's just something we stay focused on everyday.
So how much do you think of your backlog is has a contingency behind that right now with that right now.
As far as a house to sell or whatever it's less than 10%.
That's great here okay.
Alright, Thank you for taking my questions.
Thanks, Jay Thanks.
Thank you.
Before I would likely my <unk> I just wanted your question. Please press Star then the number one I know Parlophone <unk>.
Your next question will come from the line of either one.
Paul It's I think please go ahead.
Hi. Thank you my name is good to hear that everybody in the company is safe and healthy.
Thanks, sorry, I missed what I wanted to thank you for fiscal first quarter that was terrific.
I think I heard in the prepared remarks.
That you said that the smart houses have a slightly high profit margin than the rest of ads is did I hear that right over to hear it wrong you.
You've heard it correctly.
There were two things there are in our on average our smart series a communities have better pace.
<unk>, which has sales per month as well is slightly better gross margins.
Excellent.
My next question on the land it sounded like that in effect there's no.
[laughter] values not discounting in terms of what you could buy basically a the question what you're acquiring it's the same as you thought it would be three months ago. It sounds like.
I think that's right I see.
Not completely.
There's been a few deals.
Yeah, I don't know if I can give too many specifics, though I don't want to I don't want to mislead, but but I can think of several deals where weve been able.
Not that it was our goal, but as a result of these conversations about wanting more time, we've been able to get a price discount also maybe we didn't get quite the time, we wanted but we've got a discount I can think of one in particular.
There was a 10% reduction.
In price roughly 400 Grand against a 4.4 million dollar plus acquisition.
They're maybe one or two others, but I think which is good I mean, we obviously, if we didn't like a we'd say no and just terminate but I think we've gotten you know maybe in two or three or four instances some kind of price concessions.
Excellent. My next question is on the mortgage servicing rights, which it where it detracted because the profit.
I assume that's a noncash charge and I was wondering if that should become bigger bigger problem going forward rather than.
<unk>.
Coming less where problem for the timing.
Yeah. This is Derek I'm, yes, it if it wasn't noncash write down you know we run some shock test against that at the level interest rates are right. Now we don't think it will be a big problem going forward.
We run at that 25 basis point increment on interest rates and don't really see of than other big impairment coming up.
Okay, and my last lessen the question, but how bad to spending a small amount of your huge liquidity on buying back some shares given that you probably you could buy your land cheaper by buying back shares than buying somebody else's Lance just a small amount of share repurchase.
Well as we did disclose we did spend about 2 million Bucks on stock during the quarter right. Now there's just a you know so much uncertainty going on but again, you know with the stock even with the good run today still being significantly below book itself.
Thing that we will continue to look at but we want things began to stabilize a little bit before we get back into that.
Okay. Thank you very much for everything.
Due to our thank you.
Thank you I'm, just trying to I would like to remind everyone and you want to ask a question. Please press Star then the number one I know telephone coupon.
That's the funny thing no further questions at this time me. Please continue.
Yeah.
Thanks for joining us look forward to talk in do you next quarter.
[noise]. Thank everyone for participating. This concludes today's conference you may now disconnect facing I'm, having a legal.
[music].