Q1 2021 MDC Holdings Inc Earnings Call
Good afternoon, and welcome to the MDC Holdings, Inc. Quarterly earnings Conference call.
And I would like to turn the call over to Derek Kimberly director of FCC reporting. Please go ahead.
Thank you good morning, ladies and gentlemen, and welcome to MDC Holdings 2021 first quarter earnings Conference call.
On the call with me today, I have Larry Mizel Executive Chairman Dave.
David <unk> Chief Executive Officer.
Bob Martin Chief Financial Officer, and Stacy will the Chief Accounting Officer.
At this time all participants are in a listen only mode.
After finishing our prepared remarks, we will conduct a question and answer session at which time, we request that participants limit themselves to one question and one follow up question.
Please note that this conference is being recorded and will be available for replay.
For information on how to access the replay please visit our website at MDC Holdings Dotcom.
Before turning the call over to Larry and David It should be noted that certain statements made during this conference call, including those related to Mdc's business.
Financial condition results of operation cash flows strategies and prospects and responses to questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
These statements involve known and unknown risks uncertainties and other factors that may cause the company's actual results performance or achievements to be materially different from the results performance or achievements expressed or implied by the forward looking statements.
These and other factors that could impact the company's actual performance are set forth in the company's first quarter 2021 form 10-Q, which is expected to be filed with the SEC today.
It should also be noted that SEC regulation G requires that certain information accompany the use of non-GAAP financial measures.
Any information required by regulation G is posted on our website with our webcast slides.
And now I will turn the call over to Mr. Michael for our opening remarks.
Good morning, and thank.
Thank you for joining us today as we go over our results for the first quarter.
Provide an update on current market conditions and give our thoughts on the outlook leak free our industry and our company M.
M D C holdings delivered another quarter of strong profitability in the first quarter of 2021 generating net income of 111 million or $1 51 per diluted share.
Our teams did an excellent job executing in their respective markets, leading to double digit year over year increase in closings orders and quarter end backlog for company.
We also expanded our home sales gross margins by 200 basis points and improved our SG&A leverage by 180 basis points.
These results are a testament to the favorable housing fundamentals that exist today as well as the strategic focus of our company, which targets the more affordable segment of the market and the adheres to a build to order operational model.
We entered the quarter with 7686 homes in backlog.
65% increase over the first quarter of 'twenty 'twenty.
On a dollar.
<unk> basis, our backlog stood at 3.9 billion and represents the highest quarter end backlog value in our company's history.
This gives us great visibility into our closings for the remainder of the year and allows us to focus more on our efforts to maximize profitability with our existing sales efforts I will now turn the call over to our President and Chief Executive Officer.
David <unk>.
For additional comments on the current market conditions and our strategic focus.
Is it.
Thank you Larry the demand for new homes during the quarter remained strong and continued to be broad based in nature.
As we witness positive trends across a number of markets and price points.
Our unit orders increased 34% year over year, mainly due to the acceleration of orders per community, which averaged five six per month in the quarter.
This figure could have been even higher were it not for our efforts to balance orders and pricing to best manage our backlog.
We continue to see particular strength at our more affordably priced communities.
As homebuyers from all demographic segments look for alternatives to the lack of availability in the high cost of existing homes in most markets.
This has been a focus for ours for the last several years and the response has been incredible.
We attribute a large part of our success at lower price points to the quality and design of our homes.
Which allows for personalization and flexibility thanks to our build to order model.
Today's homebuyers are looking to get more out of their homes than ever before they want something that is tailored to suit their needs whether it would be a home office a place to exercise or an entertainment venue.
Our home offerings are intended to cater to the desire personalization and our home galleries provide even more options for our buyers.
We believe this approach leads to a higher customer satisfaction and better results for our company over time.
Another benefit to our build to order model is that it's more consistent and stable to run the business.
Building of speculative inventory can be lucrative during periods of heightened demand, but it can also be resolved in a glut of completed homes and a lack of pricing power when the market turns.
We feel a more prudent strategy is to start the build process. Once the contract is in hand.
This is part of our ongoing strategy to be a builder that operates through housing cycles, rather than as consistently chasing market share.
I'd like to turn it back to Larry for a few more comments.
Thank you David.
Another way in which we operate senior housing cycles.
Is by maintaining a strong balance sheet.
Our total availability liquidity at the end of the first quarter was over 1.9 billion with cash and cash equivalents representing over $750 million of that figure.
Our debt to cap ratio was 38.6, and our net debt to capital ratio was 22.3.
Recently S&P.
Global rating recognize this financial strength as well as our consistent operational performance by upgrading our credit rating to investment grade.
Access to low cost capital is a key ingredient for success in our industry and the fact that we are one of the few builders with an investment grade rating is a competitive advantage.
Strong balance sheet also gives us the ability to pay out an industry, leading quarterly dividend of 40 cents per share.
Which is up 31% from the first quarter of last year.
Returning capital to shareholders via dividends has been a hallmark for our company for years now and we believe it is a great way to attract and reward long term shareholders.
In summary.
Outlook for our company remains bright.
Thanks to favorable housing dynamics, our strategic focus and our considerable liquidity position.
We ended the first quarter with the largest backlog on a dollar value basis.
Our company's history, giving.
Giving us great visibility into the remainder of the year and supporting our decision to make significant investments in land that will serve as the foundation from the growth in the coming years.
Now I'd like to turn the call over to Bob who will provide more detail on the results of the quarter and give us an update on the outlook for the year.
Thanks, Larry and good morning, everyone.
We delivered another quarter of strong profitability.
<unk> net income of $111 million.
Our $1 51 per.
Our diluted share.
This represented a 201% increase from the first quarter of 2020.
Wholesale revenues grew 49% year over year to over $1 billion, while homebuilding operating margin improved by 380 basis points from the prior year quarter.
The growth in home sales revenues and margin expansion resulted in a 129% increase in pretax income from our homebuilding operations to $113 $5 million.
In addition, our financial services pre tax income increased to $30 8 million compared to a loss of $1 1 million in the first quarter of 2020.
The increase was driven by our mortgage business, which continues to benefit from the increased volume generated by our homebuilding operations.
Our mortgage business further benefited from a year over year improvements in capture rate and profit margin on loans originated.
Additionally, our financial services pretax income in the first quarter of 2020 was negatively impacted by $13 9 million of unrealized losses on equity securities.
As no such loss was incurred in the first quarter of 2021.
Our tax rate decreased from 24, 3% to 23, 3% for the <unk> 2021 first quarter.
The decrease in rate was primarily due to an increase in the estimated amount of energy tax credits to be recognized during the year.
For the remainder of the year. We currently estimate an effective tax rate of 24%, excluding any discrete items and non accounting for any potential changes in tax rates or policy.
Homes delivered increased 41% year over year to 2178, driven by an increase in the number of homes, we had in backlog to start the quarter.
This was slightly below our previously estimated range of 2200 2400 closings.
From a construction standpoint, we completed enough homes to reach the top end of our range. However, with cycle times extending by about two weeks from the fourth quarter. We had an unusually high volume of closings for the final week of March that caused the delay in the timing of certain pre closing activities.
As a result, we moved some of our expected first quarter closings into the month of April.
In spite of these minor delays, we remain confident in reaching our full year target range for closings of between 10.
And 11000 units.
For the second quarter, we are anticipating home deliveries to reach between 20 520 700 units.
We continue to see lower backlog conversions year over year as a result of considerable year over year increases in net orders and to a lesser extent increased cycle times, we believe that cycle times could increase further due to longer lead times for various building products and high demand for labor required to build homes.
The average selling price of homes delivered during the quarter increased 6% to about $478000. This increase was the result of price increases implemented across the majority of our communities over the past 12 months as well as the shift in the mix of homes closed from Arizona, and Florida to Southern California.
Cornea and the mid Atlantic.
We expect the average selling price for our 2021 second quarter unit deliveries to approximate $500000.
Gross margin from home sales improved by 200 basis points year over year to 21, 9%.
We experienced improved gross margin from home sales across each of our segments.
On build to order and spec home deliveries driven by price increases implemented across nearly all of our communities over the past 12 months.
Gross margin from home sales also benefited from a 40 basis point improvement in our capitalized interest and cost of sales as a percentage of home sale revenues, which is a great example of how our business continues to benefit from increasing scale.
We continue to closely monitor building costs, which have increased as a result of the pandemic. However, we have been successful to this point and offsetting most of these increased costs through home price increases.
Gross margin from home sales for the 2021 second quarter is expected to be approximately 22, 5%.
Moving no impairments or warranty adjustments.
We continued to benefit from improved operating leverage during the first quarter as our SG&A expense as a percentage of home sale revenues decreased 180 basis points year over year to 11%.
General and administrative expenses increased $12 $1 million due to increases in compensation related expenses, including higher average head count during the quarter.
For each of the remaining quarters of 2021, we currently estimate that our general and administrative expense to be at or above the $57 million. We just recognized during the first quarter.
Marketing expenses increased.
$4 $3 million due to variable marketing costs, such as deferred selling amortization and master marketing fees as well as increased online advertising costs.
Our commission expenses as a percentage of home sale revenues decreased 20 basis points as we've taken steps to control. These costs. During this period of strong demand for new housing.
Yeah.
As previously mentioned, our homebuilding operating margin defined as gross margin from home sales minus our SG&A rate grew by 380 basis points year over year to 10, 9%.
On the strength of this improvement as well as the success of our mortgage operations.
Our last 12 months pre tax return on equity increased by more than 1000 basis points year over year to 27, 6%.
I would now like to turn the call over to Stacy Woolsey, who will talk about our sales and backlog trends Stacey.
Thanks, Bob and good morning, everyone, let's look at our net new home order information for the quarter on slide nine.
The dollar value of our net orders increased 50% year over year to $1 six $4 billion and unit net orders increased by 34%.
Good day, a 30% increase in our monthly absorption rate to five six.
As David mentioned demand continued to be broad based in nature with particular strength in our more affordably priced communities.
As previously noted our net new home orders for the first quarter could have been even higher were it not from our efforts to balance orders and pricing to best manage our backlog.
The average selling price of our net orders increased by 12% year over year, driven by price increases implemented over the past 12 months as well as decreased sales incentives.
We ended the quarter with 186 active subdivisions and expect this number to remain relatively consistent throughout the second quarter before seeing growth in our active subdivision count during the second half of the year.
Now I will turn to slide 10 to discuss backlog.
As a result of our strong sales we ended the quarter with an estimated sales value of our homes in backlog of $3 $93 billion, which was up 81 per cent year over year.
Average selling price of homes in backlog increased 9% due to price increases implemented over the past 12 months decrease incentives and a shift in mix to California.
These factors were slightly offset by a shift in mix to lower price communities consistent with our ongoing strategy of offering more affordable home plan.
With that I'll now turn the call back over to Bob.
Thanks, David.
I will turn now to land activity on slide 11.
We approved 4347 lots for acquisition during the quarter of 108% increase from the prior year, reflecting our confidence in market conditions and our focus on continued growth.
We acquired 3231 loss during the quarter across 60 subdivisions, which is a 90% increase from the prior year. This.
This included the acquisition of our first lots within our newly formed division in the Boise market.
Land acquisition and development spend for the quarter totaled $358 $7 million.
As a result of our recent land acquisition and lot approval activity. Our total lot supply to end the quarter exceeded 32000 lots, representing an 18% increase from the prior year.
We believe that this lot supply combined with continued board approval and acquisition activity provides us with a solid platform to meet our growth targets.
In summary, we are pleased with our start to 2021 and believe the housing backdrop remains favorable as we look forward to the rest of the year.
We are mindful that there are many risks to achieving our goals for 2021 with that said we are confident that our talented employees across the country will continue to be successful in mitigating. These risks as we work to execute our strategic plan.
With respect to the pandemic, we are encouraged by the increase in vaccinations that occurring in the United States and other parts of the World. However, we are keenly aware that much uncertainty remains as such we remain firmly committed to ongoing safety protocols that keep our customers subcontractors and employee.
<unk>.
That concludes my prepared remarks, we will now open up the line for questions.
Yes. Thank you.
I will begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If you're a J a speaker phone please pickup your handset before pressing Macy's to withdraw your question. Please press Star then true. This time, we will pause momentarily to assemble the roster.
And the first question comes from John Lovallo with Bank of America Merrill Lynch.
Hey, guys. Thank you for taking my question.
First one I guess can you just help us dimension, how much of prices increased across your communities, maybe over the past quarter or two and you know with the order ASP at about 510 in the quarter, just maybe maybe any thoughts that you guys have on affordability today and how that may progress through the year.
Yes, I'd be happy to.
Give you an answer to that John.
So first of all with regard to how much.
Prices have increased during the first quarter.
We increased prices by about 10%.
From the start in the first quarter to the end of the first quarter for.
For the fourth quarter it was about 5%.
With regard to affordability.
Certainly we are managing our business with that in mind.
We are making adjustments based upon the demand that's out there and we've continued to see.
Pretty strong demand.
Even in spite of the recent price increases.
Got it Okay. That's helpful. Bob and then maybe just.
<unk> gross margins if you could help us just any thoughts on the progression of gross margins through the year and perhaps even the sustainability above margins heading into next year.
Yes, we put out the 22 and a half.
As our.
Estimate for Q2, and I think theres the opportunity for sequential improvement for from there we have not put a number to that yet.
Not quite ready to go out to 2022.
Yet.
But right now with the demand we're seeing.
And that lack of supply.
We think things set up well for 2022 as well.
Thanks for the time guys.
Sure.
Thank you and the next question comes from Michael Rehaut with J P. Morgan.
Hi, This is Maggie on for Mike.
First I was just wondering if you could talk about.
Any of the trends that you've seen in day April.
Just a little bit more color around what you've seen over the last month.
April this is David.
I will tell you the trends are.
Pretty consistent with the kind of the first quarter sales or sales are good I think you heard Stacy talk about their work.
So that we're balancing the demand with starts and overall, we're seeing it.
Pretty well and we have a lot of subdivisions that have a lot of demand in people are waiting for the next release of laws.
Got it thanks and.
Second I mean, obviously demand was broad base during <unk>, but could you give a little bit more regional color any regions worth calling out as being a little bit stronger or a little bit weaker.
And then other.
Meg.
Larry and I have been doing this is our 45 year and I don't think we've ever seen what I'd call real consistent demand in all of our markets. So we're feeling we're feeling that as broad based I think our strategy that.
We started a couple years ago with a lot more affordable product has been really good and whether it's Seattle, Orlando or Virginia, Maryland, Colorado across the board. We are seeing a lot of demand really is not only for affordable product per for our products that we have especially with the build.
The order momentum.
Got it thank you.
Okay. Thank you and the next question comes from Alan Ratner with Zelman and associates.
Hey, guys. Good afternoon, nice job in the quarter.
Yeah, Mike My first question not you know it sounds like you as well as others are obviously managing orders based on however, many homes you could get built so if I look at your sales pace over the last year, including this quarter, even kind of in that 5% to six per month range per community is that you know.
A decent way to think about how many homes you are actually able to start right now on a monthly basis per community and is there any ability to flex that higher based on what youre seeing in terms of labor availability or any or lot availability or anything like that or is that five to six kind of went the way we should think about that going forward.
Alan This is David.
I'll just make a couple of comments and turn it over to Bob.
We really have a policy in place since we build to order that.
We really wanted to sell homes and be able to start it for our customers in 60 days or less.
So every subdivision acts a little bit differently.
And some subdivisions, we'd get a little more absorptions and other some are a little bit less but overall.
We're sticking to our business model, Bob what do you have day to that.
The one thing I would add just from.
Kind of a practical standpoint, if you look at the number of.
Starts we had during the quarter was about 3200 and that pretty closely matched the sales that we had during the quarter.
And that gives me one indication that we're keeping up with the pace of our sales.
Like David said.
Policy that we managed to I really don't feel like we can start it out within the next.
Call It 30 to 60 days.
Then we really try not to sell it so.
So we're very detail about how we go through that process and how we track and manage through that.
Got it that's helpful color I appreciate that.
My second question, it's a little bit multipart, so I apologize, but if I look at your backlog there and the other 7700 homes or so you've got in backlog.
What percentage of those are currently under construction and for the ones that are not do you have perfect visibility into your costs on those homes or is there any inflation.
Inflation risk assuming the homes have not yet been started in and tied into that in a few years ago, you kind of toyed around with this concept of drywall specs and if I remember correctly I think you did that to kind of protect against some some shortages that were going on at that time and I'm curious if there's any contemplation to doing something similar.
Brent.
I'll just start by saying that.
We have.
About 5% of our backlog is.
Is is around 60 days from getting a few more.
Through the process, but overall.
We feel pretty good about it but one other things we're not going to do is we're not going to build specs.
We preplanned houses with the plan.
Plans.
Ready to go but we're not doing what we did in years past.
That's true, but when you know David David that 9% number you gave I just want to confirm so that's the piece of the backlog that you don't necessarily have to costs.
It's a little higher than that one inch growth copper. So so just just to be clear so about <unk> of that backlog at $3 31, I think it was about 76%.
Our backlog was started and I think the number David was referring to is the ones that are.
Past 60 days since we sold them.
Not yet started which is actually pretty normal number for us thats within a normal range.
Just due to permitting times and things like that so we feel pretty good about that and the other thing is when you look at that 76% go.
I'll go back a year, we only had 70% of the houses start so we're actually a little bit ahead on starts.
Relative to our backlog, which I think is really good fact.
Theres always the potential that some.
<unk> increases as Youre building the house, but I think once you started you feel pretty good about where you're at.
Got it I appreciate that guys. Thanks a lot.
No problem.
Thank you and the next question comes from Truman Patterson with Wolfe Research.
Hey, good afternoon everybody.
Thanks for taking my question.
First Bob wanted to follow up on pricing.
Very robust pricing in the quarter is there any way you could help us break that out between entry level and move up are you seeing any real discrepancy there and then also can you remind us how.
You all buying lumber do you actually lock it in on the trailing 13 week basis or even more spot.
Yeah I think.
On the first question I don't have the granularity between product types I would.
I would say, it's pretty similar between the two.
If I had to hazard a guess I think we're seeing good pricing.
Across most of our price points and we're not building an ultra high.
Price bands. So there is a lot of stuff even with outside of our portable stuff is still very attainable I think by by a lot of consumers.
Okay. Thanks for that.
Locking in lumber costs.
Yes so.
On the lumber cost side.
It varies by Division.
How we do it some of it.
It might be on it on a 90 day lock some of it's tighter than that.
David is there anything you want to add to that no.
Depending on which market you're in.
It's anywhere from 60 to 90 days as you well know we've had a tremendous increase in lumber for the last 12 months. So it's really great derailleur of sticker shock, but.
We believe that we've been able to increase prices.
For all of the increase that we have in lumber and other categories.
Okay and then.
A follow up question you know you all generally buy more retail lots you don't really speculate and in development.
Land price appreciation or anything like that but it seems like given the shortage of communities and just active lot supply in the market right now I would imagine those lots.
Are heating up.
<unk>, so just trying to understand.
What sort of inflationary pressures you're seeing in currently in deals and are you seeing other builders be become a bit more irrational.
Either with pricing targeting much larger communities higher absorption paces et cetera, just hoping to get get your color there.
Yes.
Okay.
Yes.
I think the whole industry has been pretty disciplined and now you have certain builders that are certainly buying bigger parcels and we are but I'd say generally speaking when I look across the industry I think everybody is.
Very disciplined they're all looking to.
To make a margin.
One other things I wanted to clarify as we do some finished lots and we also do some lots that we developed.
We don't speculate and we only buy entitled launch So Bob maybe you can give a moment for the color on kind of per spread.
The development laws that require any level of development.
For the first quarter in terms of what we approved it was actually about 70% of the loss versus <unk>.
30% finished and its always been kind of in that $50 50 type of range, we'd love to buy them. All finished but it's just not practical in all of our markets.
There is quite a bit of development at all.
Alright, Thank you I appreciate that.
Okay.
Thank you and the next question comes from Stephen Kim with Evercore ISI.
Yeah, Thanks, a lot guys.
Obviously strong results but.
No good deed goes unpunished, and so one of the things that.
We've been hearing from investors more and more it's been this.
Our concern that the builders just simply can't ramp up their starts so your 3200 figure.
That you gave I thought was important because that's up about what 55%.
The year over year, I think that's the second quarter in a row that you've done something like that so I wanted to delve into that a little bit more because obviously, that's a pretty huge ramp in your production and it's in the history books here. So you've done it just wanted to understand how much of this increase and starts would you say is from <unk>.
Both are or increase productivity within each community as opposed to a greater mix of communities that are let's say entry level in orientation. So how much was mix versus how much is sort of just ramping up your productivity within each.
Each community.
Steve I'll start and just make good cash.
<unk> comments, but clearly one of those things that's happened.
Sure constantly last couple of years as the start up process for our more affordable houses has certainly been had been faster and.
Our cycle times actually.
Little better on the more affordable products, and we're seeing a lot of demand there.
I think overall.
It's challenging for every builder today.
Labor and supplies, but overall I think our start process has been pretty good and we look at it as.
Well know every week every day, so we're really on it we really track Rob what do you have that.
Yes, I guess, just looking at kind of where we are now versus a year ago. So what we call affordable.
On.
Net orders for Q1, we were at about 63% and a year ago. It was 54% so it's increased but not.
Not to the degree that you would say, it's overly impactful I guess upon the.
The cycle time to other starts or at least I believe that that's the primary factor I think it's really just our focus on on ramping up and having the resources ready including <unk>.
Certain increases to our head count in prior periods that helped us with that.
And Steve just to add on a little bit cycle times, a little faster.
In some other markets that might not have weather like Colorado, which you know well and the same thing with Utah, maybe somewhat with Seattle with the range.
Yeah, no it's impressive and because you could almost have thrown in Texas to that.
That list of states, which isn't usually in there and so other starts.
Given that that headwind I are particularly impressive.
Wanted to ask also if I could about the order a S P.
You know obviously the theory A&P was up 12%, it's been up double digits. Each of the last three quarters you gave some good info on price so far.
Today, but was curious how much of this.
Increase youre seeing in increased option activity, I mean options and upgrades.
Versus base price would you say.
I would say, it's mostly based price.
Yes, I'd say, Steve it's maintenance, mainly based price and one other things I think you heard Stacy said as Bob said.
We've had a fair amount of increase in California starts.
That has a higher average sales price.
Great that's helpful.
Last housekeeping item land spend was I think you said $349 million. This quarter would you have a goal for the year.
We do not have a specific goal for the year.
Okay. Okay. That's fine I'll follow up later, thank you very much guys good job.
Yes, Steve Thank you.
Thank you and the next question comes from Deepa Raghavan with Wells Fargo Securities.
Hi, good afternoon, everyone. Thanks for taking my question.
So a lot of positives across the industry, Larry David Bob Stacey.
But was there anything you would call out as a concern that could linger.
Called out cycle times could be temporary maybe couple of quarters, maybe you cycle back to normal times, but anything else you would highlight.
From this continued price increases or anything that would actually.
And that could actually I wouldn't say necessarily keep you up at night, but you know something that you would definitely want it.
I understand as the year goes.
You know I'm not sure there's any any one thing.
Being in the good part of the cycle, where you're trying to figure out how to start up very healthy.
The amount of backlog and of course that puts more pressure on the labor pool.
On the subcontractors on the other.
The product supply coming through and that is complicated by the pandemic. So we've talked about lumber before and I think on prior calls we talked about appliances. One time, each vac units, we've talked about windows have come up from time to time, so its little little fires here and there.
And not just one thing so I think as we look forward, we're cognizant of that that it can pop up.
Really anywhere at any given time and the important thing is that our division managers are staying on top of it in constant communication with their.
Sub contractors to make sure they are giving the appropriate lead times.
And what have you and I think to this point.
Division managers have done a great job with that.
I'd just like to add on that.
We have the best group of Division managers, we've added 45 years.
And.
Every state in every division and every subdivision might have a challenge or two.
Our leaders have done a great job of adapting to whatever the issues may be in working their way through it.
Okay. That's helpful.
Can you talk about how your subdivision net adds are trending.
I see your active subdivisions fell the most in the mountain region I mean strong absorption there obviously.
But could you elaborate on that and how you plan on replacing communities. There I mean is that you know is that pacing.
Pacing with what you would expected are facing some difficulties right now trying to add to commodity status.
Well this is David I'll start off a little bit and let Bob add on but.
You saw that we added on a number of subdivisions in the first quarter we're in.
The subdivision acquisition business and every every market that we're in and we.
We actually believe we're going to have an increase in subdivision count by the end of the month.
What do you have to add to that.
Nobody has a month that would be by the end of the year excuse me.
Is what.
And I think Stacy described it earlier, we expected still to be a little bit flat here in Q2.
Then in the back half of the year.
We'll see.
Most of the growth as a lot of the communities that we purchased over the course of the past year come on line. So that's kind of the cadence.
The Mountain region as you noted it was down but probably is going to reflect a similar sort of trend.
Okay, just last one if I can sneak it in the sweep the steep increase in pricing in your east a 32% average pricing that stands out just curious.
But what what drove that.
How sustainable is this.
Yeah I think.
A little bit of that is mix, a little bit of its product mix and kind of mix between the two areas within which is mid Atlantic.
And Florida in that region.
I think.
Mid Atlantic is a little bit higher price, we've made a lot of investments in that market.
And I think youre going to continue to see that be a higher percentage of the overall mix going forward. So.
Probably going to stay a little bit higher.
Great. Thanks, very much I'll pass it on.
Thank you and once again. Please press Star then one if you would like to ask a question.
And the next question comes from Alex Barron with housing Research Center.
Yes, thank you and great job on the quarter.
You know I was looking at the growth you guys have experienced in orders and it's obviously pretty impressive.
But it doesn't seem like the growth and lots has been to the same magnitude. So I'm just kind of wondering I know you guys have always had a short land strategy, but I'm wondering if that's something that's just in the works.
Well we're at.
About 32000 lots.
Beliefs as of the end of the quarter.
And.
Our our closings expected for the year between 10 and 11.
This is kind of right on a three year supply. So I think it's a good spot to be in.
So say.
<unk>.
32000 is up.
About.
18%.
Year over year.
And it doesn't include.
Another tranche of lots probably around 8000 additional lots that are in escrow.
But not yet approved by our asset management Committee. So we have a true.
Behind that that were not working on so not not reflecting that number yet so we feel pretty good about where the lot supply is.
And that year over year comparison has accelerated I'm just in the past quarter, which feels really good.
Got it.
And then obviously you guys just increase the.
The dividend you know and that a stock dividend, but you know historically your payout ratio has been kind of a higher relative to where earnings are at now so I'm wondering.
Your thoughts around potentially raising the dividend even even further.
Well naturally if we're making more money per share in and bringing more cash flow into the business it feels better.
Certainly we've been a company that could pay.
Consistent dividend sensitive program began really in 19, 94%.
Been able to maintain or increase it over the time that time period, even in periods, where we incurred a loss.
Hmm.
Which really is reflective of our financial strength. So it's not always a perfect comparison versus current year EPS I think if you look over time. It may have average 30 or 40%, but it's not a perfect comparison any any one period, but.
With the business being good demand being strong supply being low and the potential for future earnings.
Good environment for continued payment of our dividend.
Okay. Thanks best of luck.
Thank you.
Thank you.
And that does conclude the question and answer session I would like to return the Florida, Mr. Martin for any closing comments.
Great. We appreciate everyone being on the call today and look forward to talking again flow.
The release of our Q2 earnings.
Thank you. The conference has now concluded thank you for attending today's presentation.
Got your lives.
Sure.