Q1 2021 Taylor Morrison Home Corp Earnings Call
Yes.
Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, please stay on the line.
[music].
Good morning, and welcome to Taylor Morrison first quarter 2021 earnings conference call. Currently all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at.
That's all I have.
As a reminder, this conference call is being recorded I would now like to introduce Mackenzie Aron Vice President Investor Relations.
Thank you and good morning, I'm joined today by Sheryl Palmer, Chairman and Chief Executive Officer and day.
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Executive Vice President and Chief Financial Officer.
Sheryl will provide an overview of our performance and strategic priorities, while Dave will share the highlights of our financial results after which we will be happy to take your questions.
In the interest of time, we ask that you. Please limit yourself to one question and one follow up.
Today's call, including the question and answer session includes forward looking statements that are subject to the safe Harbor statement for forward looking in for patient, but you will find in todays earnings release, which is available on the Investor relations portion of our website.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.
These risks and uncertainties include but are not limited to those factors identified in the release and in our filings with the SEC and we do not undertake any obligation to update our forward looking statements.
In addition, we will refer to certain non-GAAP financial measures on the call, which are reconciled to GAAP figures indefinitely.
Now, let me turn the call over to Sheryl.
Thank you Mackenzie and good morning, everyone.
I appreciate you joining us today and sincerely hope you and your loved ones remain healthy and safe.
I am pleased to share with you our first quarter results, which reflect the initial benefits of our enhanced scale and local market share as we continue to execute our strategic plan.
We achieved a 42 per cent increase in our monthly absorption pace for an all time high of $4 three net sales per community and a 320 basis point improvement in our home closings gross margin.
In addition, we ended the quarter with a company record backlog of over 10000 homes and more than 73000 total homebuilding lots under control positioning us to capitalize on the strong demand momentum.
Parenting or across each of our price points and market.
And most importantly, we made progress toward our operational priorities aimed at increasing our profitability and return metrics over the next several quarters.
After years of strategic growth and multiple applications aimed at improving our long term return potential we are committed to delivering financial performance reflects above on an operational advantages we have at chi becoming a top five homebuilder.
To that end across the U S. H M priorities are aligned to improve gross margin increased for the efficiencies leverage our overheads and optimize our balance sheet.
On the operational front. This work encompasses everything from streamlining our floor plans on design option optimizing our strategic selling process, reducing our costs through procurement initiatives and leveraging our virtual sales tools.
These efforts have always been key to our scrap but theres still room to apply our best practices consistently across our newer markets, partially offset by higher land residuals on construction costs and our newly acquired community.
We are following the proven roadmap we have use in other acquisition markets, such as Phoenix, Atlanta, Orlando, and Charlotte, where we have successfully realized significant accretion to deliver margin at or above the company average following similar integration efforts and expect to achieve comparable results.
M life impacted market.
I am pleased that these efforts are beginning to translate into strong results as reflected in the composition of our homes in backlog that we expect will drive accelerated margin accretion in the second half of the and into 2022.
For example to streamline and optimize our business we eliminated over 5000 options skus from our inventory in the first quarter alone and have reduced our Floorplan library by over a third since we began our rationalization efforts.
We have also introduced our standardized on pallets to well over 50% of our markets further simplifying our design and construction processes.
On the initiatives are driving increased option penetration higher option margin and greater protection for efficiencies.
In addition, our strategic selling practices have doubled lot premiums year over year on unsold homes in backlog.
We are also continuing to find creative ways to optimize our sales structure to drive additional bottom line accretion the most exciting and impactful of which is our innovative suite of new virtual selling tool, which we recently expanded with the launch of a new first of its fine online home can figure.
Patient and reservation system for to be built home.
This new tool allows us for buyers to pick a home site and design of Floorplan entirely online on their own terms.
With lower broker representation and higher conversion rates than the company average our virtual sales tools are enabling us to reduce realtor commission expenses leverage our overhead and enhance customer experience.
In total this focus on operational excellence and balance sheet optimization is expected to drive our return on equity to the mid teens range. In 2021, followed by further expansion in 2022 and beyond before considering the anticipated benefit from more programmatic land financing vehicles.
As I shared last quarter, we're exploring several opportunities that would allow us to grow our business for enhanced capital efficiency I am pleased we advance those discussions during the quarter and expect to share more detail in the months ahead.
From a macro perspective, all indicators are pointing to continued strength in consumer demand for housing.
Interest rates remain at historically low levels at approximately 3% M.
Dancing borrowers purchasing power and affordability remains favorable even when considering strong home price appreciation.
And looking at the buying power of our consumers we remain encouraged by their overall financial health an affordability metric.
In addition, we intentionally seek to serve a diverse mix of home buyers and carefully manage our balance of pace versus price, especially within our entry level communities to mitigate affordability risk.
As you've heard me share before we monitor the difference between the actual interest rate on our borrowers for Taylor Morrison home funding versus the Maxim for Matt interest rate.
They could have qualified for as the gauge of affordability in the first quarter. This spread averaged over 700 basis points for our conventional borrowers and over 500 basis points for FHA borrowers, giving us confidence in our customers financial flexibility, if and when interest rates move higher.
This strong interest rate share is a reflection of our consumer quality specifically in the first quarter. Our Taylor Morrison home funding borrowers provided an average down payment of 20 per se had an average debt to income ratio of 36% and an average credit score of 750.
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Notably these strong credit metrics for slightly improved from a year ago level. Despite our mortgage first time homebuyer share growing by over a thousand basis points to a company high of 40% and our share rate also.
Also expanding by 1000 basis points for 85% over the same period last year.
In other words, while we have increased and broadened our customer base to serve more home buyers, particularly at the entry level. We have maintained the high credit quality and consumers and we have long enjoyed.
I attribute this to our mortgage teams diligence prequalification and barely all our home buyers prior to entering into a purchase agreement.
Embedded value of our actual services to our customers and homebuilding operations.
Turning now to our sales success in the first quarter, our strong activity was driven by gains across all geographies and consumer group for.
A couple of highlights for sharing.
Among our markets, who experienced the strongest year over year increase in our monthly absorption pace in our central region.
Includes Texas and Colorado.
Strength has been partially driven by an influx at home buyers from La <unk>.
On your share of our Texas sales orders in the first for double pre COVID-19 levels with acceleration throughout the quarter in California home shoppers, suggesting further gains in the months ahead on.
Among our consumer group, our active adult segment drove the highest year over year gains in net sales orders and absorption pace as this cohort increasingly reengage the vaccine rollout accelerate and strong home equity gains Peel mobility among existing homeowners.
These active adult buyers are also relatively less impacted by changes in Christie do you do an above average share of all cash transaction.
Given the demographic tailwind in this segment of the market I'm excited to share that we are expanding our signature active adult lifestyle brand F. One on Nash.
Actually its home based in Florida, where we have established a reputation for distinctive resort style living and columns here services that command a strong premium among active adult home buyers.
We recently introduced the Esplanade Brown to the West coast with two new communities in California and have plans to open another in North Carolina later this year the.
For the expansion has been well received as our southern California community has been selling with limited release, there's amidst strong demand since a successful grand opening in March while our Sacramento communities slated to open in May already has a waitlist of over 2000 interested Shah for.
The nationalization of our Esplanade brand will bring greater consistency to our active adult communities leverage our brand awareness and meet the needs of active lifestyle residents on a per market.
With above average gross margin, partially driven by higher option take rates and lot premiums that are more than two times. The company average and we expect this growth will be a long term benefit to our overall profitability.
However, today's remarkably strong housing market is not without its challenges the supply side of our industry remains constrained by the superior deficit of grade labor ongoing COVID-19, and weather related disruptions affecting product manufacturers and distributors and municipalities level delay.
Our teams are navigating this environment by holding new sales to align to our starts pace managing construction cycles and leveraging trade relationships to ensure our business continues to run effectively.
In the first quarter, our protection pace of 4.1, our per community was that more than 70% year over year to another company record highs and on site.
Full time for roughly flat and for every year as our teams have accelerated our construction capacity despite the supply side challenges.
In addition, we are raising prices in nearly all our communities and as mentioned limiting releases too along with production.
Disciplined approach ensures we're realizing appropriate price increases in excess of cost inflation, managing the length of our backlog and maximizing the return potential of each asset.
In closing, we're committed to taking full advantage of our competitive strength and executing on our long term strategic vision, which has been years in the making after six acquisition debt.
Quipped us with the size and team capable of generating attractive long term returns for our shareholders. That's what I as I have said before we believe 2021 marks an important inflection for spring and our multiyear journey to realize the operational and financial advantages of our significant growth and I.
Look forward to continuing to update you on our progress as we move forward now.
Now, let me turn the call over to day for his financial review.
Thanks, Sheryl and good morning, everyone.
Turning to the details of our first quarter results generated net income of 98.
For 75 cents per diluted share compared to a net loss of $31 million or 26 cents per diluted share in the first quarter of 2020, which had been impacted by our acquisition of William Lyon homes, a year ago.
During the quarter, our net sales orders increased 30% year over year to 4492.
This quarterly level in our company history.
Our monthly absorption pace increased 42% year over year to $4 three net sales orders per community also an all time company all right.
From an all time company low cancellation rate of just six per se.
As Sheryl noted we achieved this record sales success, even while the strategy is designed to meet our sales activity to align with production capacity.
Underscoring the resiliency of the current demand environment and the competitive strength for our product offerings.
This strength continued into April as we have managed absorptions into the high <unk> range.
It's all for growth combined with our large beginning backlog drove a 54% year over year increase in our ending backlog for 10070 for aimed at quarter end.
Representing new sales are you a $5 3 billion.
For a stronger than anticipated activity drove our average community count to 345 is accelerated community Closeouts once again outpaced New York.
Great.
This was below our prior guidance range due to a number of factors, including stronger than anticipated sales paces and ongoing extensions.
Frugal.
In addition, given the size of our backlog and commitment to our best in class customer experience.
We opted to delay pre sales and a handful of communities and wait until models are fully complete the grand open.
Strategy, we believe ensures optimal margin performance unusual items.
As a result in the second quarter, our average community count is anticipated to be approximately 330 and.
And for the full year, we now expect our average community count to moderate to approximately 330 before rebounding from late 2022.
Higher in 2023.
We continue to expect to open nearly 150 new communities this year.
First quarter, we delivered 2008 to 121 closed home was also slightly below our prior guidance range due primarily to the impact of disruptions related to the February winter storm in Texas.
We are pleased that thus far in the second quarter nearly all first quarter record closings have now been delivered.
However, there are still lingering disruption from the storm for the supply chain, particularly in petrochemical manufacturing, which is causing delays on the classic building components, such as plumbing and electrical products.
Including the impact of these delays on our Texas production, we expect to deliver between $3203 400 closed homes from a certain for.
However, Texas the cycle times are expected to normalize by the third quarter.
As a result, we continue to anticipate a significant ramp in deliveries on the second half for the year to drive our 2021 for your delivery to the range of 14000 15000.
This implies an 18% year over year increase at the midpoint and is consistent from the prior guidance range.
Turning now to gross margins our home closings gross margin was 18, 6% a 320 basis points from the first quarter of 2020, which was impacted by our acquisition of William Lyon homes.
We anticipate our second quarter home closings gross margin to be generally flat sequentially in the mid 18 per cent range.
Based on the timing of cost increases on home price gains, we expect our first half gross margin to reflect the greatest impact from lumber and other costs on inflation.
Based on an acceleration in margin accretion on the second half of the year driven by pricing power on operational synergies as we passed the critical 18 month, Mark post our acquisition of William Lyon.
We now anticipate our full year 2021 home closings gross margin to improve to the low 19% range.
Looking ahead, we expect further improvement in 2022 based on the favorable mix of our backlog on the operational efficiencies that as Sheryl discussed earlier.
Our SG&A as a percentage of home closings revenue was flat year over year and 8%.
For the full year 2021, we continue to expect our SG&A declined for the mid 9% range, reflecting costs leverage from anticipated increase in our total revenue and cost synergies from our enhanced scale.
And the first quarter, we invested approximately $552 million in land acquisition and development up from $317 million on the first quarter of 2020, given the increased size of our business following our acquisition of William Lyon homes.
In 2021, we continue to expect our total land investment to be approximately $2 billion.
We remain disciplined in our underwriting to acquire land, where we see opportunities to drive profitable growth over the whole cycle with the land acquisitions, we are approving largely due to the impact deliveries in 2023 and beyond.
Our lot supply.
The approximately 3000 lives since year end for 72000 total lots on the control.
This represented five eight years for total supply of which for years was owned.
As of quarter end, we control, 32% of our losses through auctions and other arrangements up from 28% in the first quarter of 2020, and marking the highest level since the third quarter of 2018.
To minimize risk and maximize returns we are targeting an increase on our controlled share to approximately 40% within the next two years, which we expect to achieve true evolving land financing vehicles, Sheryl noted and other off balance sheet structures, such as joint ventures on project financing that we utilized when appropriate.
Net.
Turning now to our balance sheet, we ended the quarter at $1 1 billion of total liquidity, including $393 million of cash on hand from $748 million at full capacity on our $800 million revolving credit facility, which was undrawn outside of normal for letters of credit.
Additionally at quarter end, our total spec inventory equaled three homes per community nearly all of which were under construction. This was well below our normal run rate due to faster than normal sales conversions of our spec starts.
Overall, our capital and liquidity position are in solid shape, and we will continue to manage the business within the context of our disciplined capital allocation framework.
Our net debt to capital ratio equal to 41%.
On our outlook for strong cash flow generation, we continue to expect our net debt to capital ratio to reach the low 3% range by year end.
Led by further improvement in 'twenty two.
Lastly on the first quarter, we spent $38 million to repurchase 4 million shares. This brings our cumulative share repurchases for approximately $690 million or 30% of our shares outstanding since 2015.
At quarter end, we had $48 million remaining on our current repurchase authorization.
We'll continue to utilize share buybacks opportunistically to return excess capital to our shareholders and enhance for overall returns now I'll turn the call back over to Sheryl.
Thank you day.
Two weeks ago, we published our third annual environmental social and governance report, which highlighted the U S. T related achievements, we made in 2020 and the initiatives and priorities. We are focused on for the future of.
At Taylor Morrison, we strongly believe that our people centric approach to home building is foundational to our ability to generate long term attractive returns for our shareholders to that end, we incorporate sustainable forward thinking decision, making across all layers of our organization from <unk>.
Land development construction process for those people management community engagement and governance.
I think some of the highlights I am proud to share is the progress on our exclusive relationship with the National Wildlife Federation, with whom we collaborate to preserve and protect for natural environments in our community to date, we have certified nearly 4000 acres of wildlife habitat and develop plans for over 170.
More protect bases monarch better from the gardens, and eco friendly place gates across each of our divisions to foster responsible stewardship of the land we built on for generations to come.
We are for deepened our partnership with homemade America to renovate shelters and for our local communities and provide housing options for our neighbors most in need.
This is just one way in which we empower our team members to use our <unk>.
Resources and talent to uplift our community a responsibility, which became even more important in 2020 as the pandemic lays bare the housing and security space by so many Americans, which is a crisis, we feel uniquely charge to help address.
This commitment to plan for paint we only earned out for 2021 on Hearthstone builder humanitarian on one which is presented annually in recognition of our lifetimes amendments battering community.
And lastly, but for me now.
Proud that we have helped pave the way for greater gender inequality, and we feel similar really compelled to be a leader in representation for all races, and ethnicities, starting with my own amendment to the CEO action plan.
Promise to advance diversity and inclusion in our organization.
In closing I'd like to offer my deepest appreciation to our team members and trade partners for their tremendous effort and commitment to our customers and our organization now.
Now I'd like to open the call to your questions. Operator, please provide our participants with instructions.
Ladies and gentlemen for you or a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone extra question has been answered or you wish to move for yourself from the queue. Please press the balance sheet.
First question comes from Matthew Bouley from Barclays.
Yeah.
Hi, This is Ashley Kim on for Matt today.
On Saturday actually.
Hi, they're just given supply chain tightening labor inflation lumber inflation that you mentioned in the prepared remarks can.
Can you just talk about your estimates are on cost inflation and all of them changed given the giving the full year outlook for Q on Monday, if maybe what assumptions on pricing cost you're embedding in the gross margin guidance.
Yes, good morning nationally I'll start on the cost side.
Clearly the focus continues to be on lumber, we're hoping to see that normalize as we move through the year with mills coming online hopefully some potential relief trade agreements reached on.
There are other pockets impacted by costs as we've all heard.
Rather than being one of those assets impacted cost and put some pressure on the supply chain.
As we look out I think.
From a cost increase standpoint for the rest of the year, its probably around 400 basis points.
But we're working with our trade partners.
On labor getting materials and.
Supply is under the job sites, but I do believe we're going to see prices stay at a cost as we move through the rest of the year as well.
You know I might add to that Ashley because states right. The biggest one that everyone's talking about lumber.
I would tell you that the industry continues to raise the issue of lumber price is what the administration and probably members of Congress because it feels like we've been pretty slow to engage M on the Canada negotiation.
And I think even more concerning them now because I do understand we're getting close in the next many weeks, but I think even more concerning or maybe better said the greater opportunity is if we could really respond with better domestic capacity I mean, if you look across the border in Canada, we've seen that their mills have been kind of open it for.
For full speed since August.
And we just haven't come back to full capacity, yet, but I think we're all very excited about that opportunity in the months ahead.
Yeah.
Okay. That's that's helpful color on them.
Then just my next one as we get closer to the back half from 'twenty, one and start to think about normal sales pace given commodity there are running low on.
Do you think sales pace kind of elevated on an absolute basis, while just sequentially new thing, we're kind of taking a normal seasonality.
Or how are you thinking that we will progress on on.
Just given your stock base.
Yeah No. It's fair. Good question I think you have to look at a couple of things one when you say stays elevated right now there's a few things that are at play right.
We are as we reported you know kind of at a record pace for next first quarter. We are really managing that pace as we look forward as we said to align production. So I think if you want to talk about the demand side. The patients can remain quite elevated and if you wanted to do a compare for us year over year, there are still tremendously elevator.
But I'm Gonna I'm sure.
Share that we likely won't repeat this over for patients we look for the balance of the year, partly because of our alignment to production, partly because of some seasonality I think in April we're probably somewhere in the three seven range.
Thank somewhere in those high threes would be something that we would plan on compared with anything over channel as we look for the balance of the year.
Great. Thanks, Sheryl I'll leave it at that.
Thanks Ashley.
Yes.
Our next question comes from caller restaurants with BTG.
Charles curious with two we're looking at it community count now that looks like it's going to be kind of flattish it sounds like until sort of near the end of 2022, how do you expect those since you'll be opening some on closing some debt mix to change if at all between different product types in different geographies.
Okay.
Hi, Carl good question.
A couple of things there I think at the most global level. When you think about the consumer groups I don't think you'll see a dramatic change I mean, we've seen a shift right where something close to <unk>.
On a reported in my prepared comments our mortgage.
Tumors, we saw about a 40% share of first time buyers when I look at the first time buyer set we're up about 40% year over year. So I think this new structure that you can look deeply at our in our investment deck is probably the overall percentage.
When you look specifically to the geographic penetration there arent there has definitely been some movement on.
You'll see in the press release, we have seen a reduction in our central.
On some of that is getting ourselves away from a finished lot business, which I would tell you, Texas historically was and really making sure we can control our own destiny.
And you know not having the chance of gapping out based on development delays by controlling our destiny. So some of that by running larger more efficient communities is part of it. So you might see some you know I'd say, Texas is the place where you have seen that the biggest change, but then when I look at consumers across the board.
Say I'm pretty much status quo.
Thank you Sheryl I think maybe can you talk a little bit about what the land market looks like now.
We've had a couple of builders say, well, we're seeing a bit of erratic pricing in some markets and others say that debt that the business remains largely rational I'm just curious as to your perspective on that thanks.
Thanks Carl.
You're always going to be able to point to those one or two.
Crazy deals I could probably do the same but it's probably not where I would focus my efforts.
I think it's about how you approach the land market I mean, everybody is out there given the patient that had been reported through the quarter everyone's running into the same challenges and opportunities to bring more land on board, but I would say as we continue to stay focused on our strategy around key location.
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Actually that's quite helpful. Because there's been a lot of moving out to the fringe.
We're going to retain our strong processes on approval cadence on the way we look at deals in fact, when I look at our land residual.
Over the last 12 months I would tell you that it's actually in line and in some markets a little bit lower obviously, that's aided by price appreciation. The biggest shift were seeing in our land kind of acquisition efforts as we are.
Seeing a much higher penetration of raw deals and if you don't see the same finished lots available, but even with the the activity that's out there our return on margin expectations remain higher than we've seen for a number of years.
Great. Thanks, very much for them.
Thank you Carl.
Our next question comes from Alan Ratner with Zelman and associates.
Okay.
Yes.
First question I'd love to drill in a little bit on the average order price to a huge increase this quarter.
18% year over year and you know.
I'm just curious obviously theres a lot of pricing power, but can you talk a little bit about whether any of that was impacted by mix or is it a price on the mid fives now kind of on the right way to think about your your business going forward and assuming that's the case you know I'm a little bit surprised maybe theres not more of that upside flow.
<unk> to gross margin in the back half of the year, just given David your commentary on cost inflation kind of in that debt 400 basis point range. So any conversation there would be there would be great. Thanks.
Yeah on good morning, I'll start maybe with where we think asps is going to trend.
To help you guys from a modeling perspective given.
Given the ramp up that we have seen an ASP, we're likely going to see the.
The 2021 ASP for.
<unk> hundred 15 for 520 range.
Some of the pricing holds where it is obviously theres some additional pricing that we believe that's out there on the back half.
We do believe it's going to stay out of cash.
Okay.
Yes, I can jump into the sea.
Yeah the margin.
I guess just for.
Perhaps maybe why that's not flow through to margin a little bit stronger just given how you know.
How much pricing is up.
Yeah, I mean, there is a couple of things I mean, we are seeing the pricing power. There. If you recall debt with William Lyon, We did that acquisition.
Legacy margins on the Williams side, our William Lyon side, we're going to be lower than what the traditional Taylor Morrison side is just because it was a different different cost structure and we've talked a lot about the fact that it takes about 18 months to bring those margins up by working through the synergies.
The synergies are in place.
Now, but obviously it took most of the 2020 for that to get there. So many of the deliveries.
We're seeing this quarter on to some extent in the second quarter are coming from those legacy William Lyon communities that we started before those synergies were in place as we move into Q3, those deliveries will have more of the synergies on there which will be more apparent in the margins.
And those synergies should start to be fully realized in about Q4 for us. The other component of that is just our level of spec inventory Allen.
We don't have a lot relative to what we'd normally have.
Again, we got a lot around the time of the William Lyon acquisition, we sold through that pretty deeply.
Kind of right out of the gate in part because of COVID-19, we're trying to push those through one of those specs probably weren't the best specs. So we tried to be aggressive to generate the cash.
We're building trying to rebuild that spec population. It's just taking some time. So we just have a reduced number of specs that we can sell and close within the year, Yeah, and I think even more pointed on that Allen I mean Dave's point on this back on the T. V belt is significant on how it's playing in your 2021 margin if we take.
You're on a little.
As Dave tried to take you on a little bit of a history. We closed the deal you might recall, we had something around 2000 2200 Lions back so when COVID-19 happened, we shut down on the spec machine and to David's point. Some of those were challenged stacks and we were going to make sure that we sold through those and I would tell you as we move through the year.
Our COVID-19, probably helped that quite a bit also continued focus on our to be built.
Part of the portfolio and the way, we double down on making sure those making sure those buyers could make.
To make it to the closing table with everything that was happening through the first half of last year.
Coming into the year with a high penetration of <unk> backlog, and then having lumber move with those.
At those prices already being contracted for on sales price is being contracted for put some more pressure.
Obviously as we moved into the end of the air on into the first quarter on todays point to start building up some new spec inventory, we have deployed probably the same strategies. Many others have and that is you know we're releasing those specs a little bit later in the construction on.
Cycle, we're making sure they get the full advantage of market pricing, but we didn't have that at the end of the year with a significant.
On backlog that we came into 'twenty one way.
Got it I appreciate all of that debt color there it's very helpful.
If I can ask squeeze the second one and Sheryl. Thank you for the comments on the absorption pace on kind of helping us think through where where that might normalize out of that.
The improvement you've had on your start pace over for a month is very positive, especially given all of the labor constraints out there today and I know there is seasonality in that but I guess I'm a little bit curious why.
Starting over for a month right now per community and you just sold over for in the quarter why that sales pace can't be sustained.
At over four months at least in the near term and I'm curious maybe land is the reason why you just don't want berns for more communities faster, but can you comment could you comment on that.
Yeah, we want to continue to align pace and start sales patient starts.
So we've hit this pace of the for one.
Thank you have a couple of factors in there Alan one has some seasonality of where our starts can happen.
I think too I wouldn't say land is really.
The governor at this point, because I think where we're starting the homes, we actually have the land in inventory, but we're going to make sure that the the trades can retain the pace. It is a fairly significant ramp up.
And there was one more thing I was just going to mention so when you think about the starts pace, but we're trying to push backs in there as well.
I'm, sorry, and then obviously, we're continuing to push price yeah, we do want to come out that might meter meter piece, a little bit as well, yeah, and you're right, Dave and the other thing I was going for that sorry, I lost it for a second is we're really trying to make sure Alan that we only.
Keep about two months of sales not started in front of US many of our buyers go through the design center process. We're trying to continue to streamline that process from contract to start.
If you think about our active adult buyer and you know they might quite somewhere in the range of 2025 per cent of purchase price into that home and options.
So if you were starting off spec for Allen it would be different but we are a little bit of an elongated front end.
M, which we continue to try to streamline but I'd say, that's part of it as well got.
Got you that's very helpful. Alright, guys. Thanks, a lot good luck.
Thank you.
Our next question comes from Michael Rehaut with Jpmorgan.
Okay.
Hi, This is Maggie on for Mike.
For now question.
First question on the active adult.
Expansion beyond Florida that you talked about.
As you look into the longer term and you presumably continue that expansion into more markets do you see any meaningful shift in your mix of buyer types or equal. This more allow your active adult segment to grow in line with the rest of the business.
Yeah, I think hi.
I think saying that it would stay generally the course Maggie is right. We really do like that part of the business you know in the course for our active adult sales were up about 46% our pace was up about 62% that's a little bit guided by what happened at the end of the first quarter of last year with <unk>.
And that was the buyer that really shut down, but I would tell you that they've come back with a vengeance.
And in fact did come back with a slightly different attitude as well and really we see some urgency in their buying decision, but I would say somewhere in that 15% to 20% range.
Buyer mix as the business continues to grow it's probably you know for the next couple of years about right.
Got it thanks.
And then second I was wondering if we could.
Get some more color just around the supply chain I know you talked a little bit about how the Texas storms impacted the business in Texas, but as you look across the entire business.
Are there any other particular.
Particular pressure point.
Calling out.
Well there are and I would tell you that ebbs and flows what is a challenge today seems to get resolved.
Borrow on a new challenge for Pops up I mean really it's.
The labor is there obviously that's for fight, but it always is we're seeing some labor pressure, but I would characterize that more or less is moderate.
Some of the greatest challenges are just on allocations of supplies. So we seem to be Friday battles around drywall doors windows those come with extended lead times.
But it's not one thing that's overly disruptive these things pop up like I said, we basically have a war room that we're managing all of this stuff out of and when problems arise we find solutions put them in place.
I expect that to continue throughout the year. So it is a challenge, but it's something that I feel like we can manage through it.
You know and I think key to Dave's comments Maggie are so different market by market I'll give you a couple of examples there is an overarching one if we were to go back day.
Two corridors appliances, they were trading out appliances literally across almost all of our markets because they were so back ordered on flash.
Washers dryers for traders today that that's not a problem and that was like 80% of the team's focus two quarters ago. If I go to a place like Texas, correct, which as you know.
In Texas, which is a predominantly brick market. There are certain colors of Brexit you can't get a quarter from now that will probably be different.
A couple of markets for dry walls on allocation you have many markets, where it's not at all so it's just it's a little bit of a lack of dose game, but we manage that each market and I share. The teams are generally doing a really nice job with it.
Got it thank you.
Thank you.
Our next question comes from Jamie Kevin This with Wedbush.
Hey, good morning, everyone.
So my first question on G&A expense this quarter up for.
Pretty meaningful year over year and sequentially.
Talk about that increase and what we should expect for a quarterly run rate going forward.
Okay.
Did you say G&A.
On the G&A dollars.
Yeah some of it.
That there is a little bit of timing that goes on there.
Look at more as an overall SG&A leverage.
We did leverage the selling expense, we didn't get the leverage on G&A.
Just because of the lower closings, we talked about the push that we saw and in Texas from the weather how do we have that we would've probably saw another call. It 30 to 40 basis points of leverage overall on on G&A.
But we still are firm on our guidance that we're going to end up in call. It the mid 9% range, depending on where ASP. He comes on it could be slightly better.
But it is something that we're focused on.
One thing I'd say is a strength that we generally lose on a pretty tight.
G&A as a percentage of homebuilding revenue.
Hum.
Second question at the end of 19 on a pro forma basis between you guys from William wanted you all had almost 450 communities and now thats tracking down to $3 30 by the end of this year with a slow sounds like a pretty slow growth rate to get to 23.
I guess why from an operational or strategic perspective, do you want on cheap the communities. This low and is it a.
A lack of opportunities that you see in front of me to grow that came out for you. We're just not willing to go out to some of these tertiary exurb markets to try and get some more community count a little more volume.
Lots of lots wrapped up in there Jay let me give it my best shot so no I don't think there's a strategic path for our initiative to keep it low.
I would tell you there are some places where we're going to trade off doing 30, 40, 50 unit communities for larger community.
I mentioned that in Texas that was certainly one market, where we were reliant on a lot of developers and we've absolutely change that but that's not a company initiative to keep it low.
I think when you look at the total number of communities back and like you said 19.
And then we look at what actually came on board when we acquired the William Lyon.
A number of different ways that we count community. So I would tell you. The for 50 combined was probably never quite.
Right because when we aligned it to our community every product line.
Is it community, we had a slight shift there you'll probably recall from a couple quarters ago. We also took some of the underperforming assets with William Lyon, and we made the decision to dispose of those.
And so what Youre seeing now Jay is really more of a timing as we continue to re grow the business.
One because we've sold through at a four two pace, which as you know 50% higher than our historical pace. So that burned for them relatively quick it doesn't bring any of the future ones for hours, but the teams are quite focused on year over growth and you'll see as we move into next year, you'll see that continue to tick up with strong growth for <unk>.
Yeah, Jay we still plan to open nearly 150 communities. This year I mean, some of it is as Sheryl said, it's showing through more quickly. Some of it is just delays in getting some new communities open and we're focused on that some of that is from just municipalities on working through but.
For me the Big takeaway as Sheryl said, we're going to see growth in.
22 over 21, but really towards the end of 'twenty two 'twenty three youre going to see that inflection point, where you'll see the net community count for a more meaningful. So it is it is really timing.
Yeah.
And then lastly on active adult.
As the older product down in Florida that you acquired from from Avi.
Wondering is it selling at or better than this.
At the same pace that you're seeing from maybe some of the newer properties that you talked about in California, and North Carolina.
Yeah. So if he was speaking I think specifically on one project.
Florida called told me that.
I would say that's in line with the balance of our active adult communities. What we have looked at doing day is rationalizing the product line across the state. So I would say you know it's not even the project debt I would speak to in a community like solar Vita.
I would tell you that one in active adult kind of makes this decision first day look at for lifestyle component.
And then they find the house and so we find that our consumers travel the state to look at do they want a country club experience, which they might be able to go find the Naples do they want a water experience, which they can find in Sarasota do they want something that's more kind of intown, which.
You can find in Orlando or do you want a community that's further out and I would say.
Kind of away from the crowd and you can find that out in total Vita.
But the reality is yes, the penetration is pretty similar across all of those.
And it's really about the consumers selecting which lifestyles right for them and then they they.
They have plenty of home styles sizes to pick from.
We are seeing you know I don't know if it was part of the question, but I'll go ahead, because I think it's interesting we are seeing a little bit of a shift since COVID-19 with whatsapp buyers looking for and specifically on the product and I find that interesting because usually you don't hear a lot of talk around the product with the consumer.
And it might be because were seeing a pick up in that Midwest northeast from buyer and they want more of an outdoor experience, but we are seeing this.
Really conscious desire to have greater outdoor spaces that can mean large screened and patios that can mean outdoor kitchens, but that's probably the biggest shift we've seen in that fire.
Sure.
Got it okay. Thanks for taking my questions. Thank.
Thank you.
Our next question comes from Truman Patterson with Wolfe Research.
Hi, good morning, everyone and thanks for taking my question.
First just wanted to touch on the community count guidance again, just really trying to understand what shifted over the prior quarter for you all to update your guidance maybe rank order was it primarily the elevated absorption pace that you are now.
Banking and you also mentioned some local municipality constraints could you could you touch on that a little bit maybe how.
Much the approval process is extending and then finally on on the land development side, you know everybody is really trying to ramp up.
Community count today as quickly as possible you know are you seeing any inter.
Internal development delays as well.
Short term and so on.
On the community Count I would breakdown the difference probably 60%.
Accelerating sales pace and about 40% was a delay in getting the communities open.
Again, that's kind of a timing issue. So those are getting pushed out into Q2 might be a little bit Q2 into Q3 push a little bit.
But when we look at where communities are where we have loved for cell.
We know that we will probably offset some of those new community openings with some additional closeouts, but it gets us down to that $3 30 number. So we feel pretty good about that it's going to stay at that that run rate.
As we move through the next quarter or couple of quarters, all the way to year end and when you look at that 40% true man I mean, when you delay because it's a big word right because that could be I mean land, it's not really on delays because we knew about those when we gave our guidance, it's really about how we bring the product to market.
So for example, there might be a half dozen of those communities, where we decided not to enter pre sales but.
Lease up the model complex make sure it's 100 per cent buttoned up because when we look at the production cadence on when we're going to start those houses. There was no reason to rush it to market. So theres a lot of things when we talk about that 40% and I'd say the smallest piece of that would be land delays, but really just how we bring the positions to market.
And you move from a month.
On obviously it changes your community count.
Okay. Okay. Thanks for that and then Sheryl in your prepared remarks I did.
Quite catch this and I'm, hoping if you could elaborate on it a little bit further.
Uh huh.
Question on affordability and you were discussing your backlog and how much are I'll, just say kind of wiggle room you.
Your backlog has relative to rates before.
Being.
We'll say on.
Unable to qualify.
Yeah, I share that true men and you know this is a.
This is a stat that I've been giving every quarter I don't know at least 234 years and it's really fascinating because it's almost with all the discussion that we're hearing in the marketplace and certainly on I think for calls this quarter.
We're actually seeing a cushion that's almost at an all time high so it really speaks to kind of the change in the consumer so to your point specifically, what I said is that the average Christian our conventional buyers has there's about 700 basis points in range.
On the FHA buyer has about 500 basis points.
And as I mentioned, the overall credit profile is really improving even though we've seen prices go.
Go up and even though we've seen an increase in our pool of first time buyers.
The thing that I find fascinating.
Yes, I would have expected that there would have been an offset with square footages and that maybe what people were doing were buying smaller houses.
But that's actually not the fact at all our square Footages are either flat to slightly up.
Saying that our inventory how square Footages are down which makes sense does that would be more of our more affordable first time buyers as to where we would put our inventory, but our buyers that are selecting a lot and home site. There are actual for the square footages are going up.
And so I think the important thing here is to really put all of this in context. So you can look at that room that we have and say hey, they might have five to 700 basis points, but emotionally I don't know that.
If interest rates rates went to seven or 8% that wouldn't shut down the market because I think the psyche of the buyers would be quite impacted.
Try to ground myself with like whereas the consumer today from a year ago and if I look at you know where we are from a year ago.
We are probably have a 30 to 40 basis point improvement from first quarter last year and interest rate today and that gives the consumer somewhere around 17% to $20000 of more buying power.
If I think about where that is today, which is somewhere three per center under for both conventional and FHA to the peak in the last 12 months, we're about 70 to 80 basis points higher.
And then if you want to kind of look long term at the affordability to be M. D. N. A hours affordability interest index, we're actually considerably more affordable than on our long term 20 year average.
A lot of moving parts and pieces on absolutely. We've seen price has moved but the good news is the consumer is making some decisions that still make this a very affordable time to buy.
Alright. Thank you all for your time and good luck on the upcoming quarter.
Thank you.
Our next question comes from Alex <unk> with B Riley.
Yeah.
Can you give us an update on your built to rent a strategy.
Yeah.
Yeah.
You bet. Thanks for asking the question. So we have two projects.
Phoenix that have begun production.
And we actually just closed on our first deal in Phoenix, which is gonna be a combo deal with our.
Our traditional home building side as well as our build to rent.
We've got our vertical construction amenities, obviously going forward in our first projects in Phoenix.
On the coffee most importantly, as we look at the growth of the business, we have about 20 deals.
At some stage from accepted LOI through contract.
That you'll see coming to market over the next couple of years I think what's probably most important from a modeling standpoint is we have no real impact on the financials until we begin to sell the assets, which will likely be in late next year, you'll start to see some immaterial rental income come into the business next year and when we give next year's.
<unk> will include that.
But excited about.
Kind of the trajectory and as we said last quarter by the end of this year, we will have nine markets.
With B P. R in the portfolio at one stage or another.
Thank you.
Thank you.
Our next question comes from Tyler battery with Janney.
Yeah.
Hi, good morning, Thanks for taking my question.
Appreciate all the commentary all the commentary thus far here just on one.
Multi part.
Question on my end Youre, just interested in your views on on leverage and capital allocation in this environment I mean, I think you've laid out an outlook with the community count ramp and then you'd be margin improvement there should be a substantial amount of earnings power coming through the business and you also have a very strong backdrop right now.
Strong demand strength from fundamentals.
How much was on.
Our priority is lower leverage right now where would you like to see leverage move in the long term and given the environment and your outlook over the next couple of years.
Would you rank leverage.
M against some of the other uses for your capital cash whether it be repurchases or really ramping up for land acquisition side of things even more from here.
Yes, Tyler Thanks for the question first and foremost we're return focus the actions that we take are are designed to.
Prove our returns.
And we strive to be top quartile there over time.
<unk> Leverages important it gets balance with all the other opportunities that are out there.
<unk> talked about by the end of this year will be in the low 30% range from a net debt to cap.
Standpoint.
That the drop further next year as well.
What we can do around Leverages is somewhat constrained just based on debt. We have to do we're in a great position that we don't have any debt due till 2023.
I look at where current rates are right now, it's a little bit expensive to take those out it gets more appealing as we move through the year. So we balance that with other investments that we make just in general whether that'd be back on the business through organic growth.
Buying back stock or paying down debt so.
We will continue to look at all of those were focused on buying back stock right now just given the limited opportunities when we look at debt at least here in the short term.
We continue to believe strongly our stock's undervalued.
We have about $48 million share repurchase authorization, but I.
I think you will probably see us go through that maybe a bit sooner than later and then once for all through that we will reassess our investment opportunities, but again. This is about driving returns for the business first and foremost.
Okay, Great I'll leave it there thank you for the detail.
Thank you.
Our next question comes from Mike Dahl with RBC capital markets.
Hi, Thanks for fitting me in.
Appreciate the color so far on it.
First question.
As a follow up on capital allocation, but first.
In terms of the community count your previous expectation with respect to 'twenty two.
It was kind of modest growth.
Later in 'twenty, two relative to our base of kind of 360 365 communities. So now when you are referencing.
<unk> growth expectations still in late 'twenty two is that now off the 330 base or would you still expect.
You could get something.
Kind of closer to the 300 Sixty's by year end next year. The second part of this is I know you talk about kind of harvesting in the returns focus.
But given the sales pace community count has shifted relative to how you would have viewed things over the past year or 18 months.
Has your attitude towards M&A changed at all or is there a willingness to look at opportunities going forward.
So, yes, we will start with community count So yes, Mike.
Mike.
For the.
Call. It a $3 30, we do expect to grow that in 2022, obviously as the year goes on and we'll refine where we think that expectation is but it's probably somewhere in the mid three hundreds.
And then we will see that inflection point as we get to the end of 2022, we expect to start call. It a day or additional wave of growth on the community count and we will see that move higher in 2023.
And to hear.
M&A question Mike.
I think as we said last quarter.
Right now we are a year into a fairly significant transformative M&A and we're just anxious to get everyone back to work full time working on site.
So that we can fill.
Finish the cultural integration make sure that we're seeing all the synergies hold true.
So its head down for us on.
Getting this one done and too early to talk about anything in the future.
Okay understood.
My follow up question.
More around from the cost comments and Dave I'm trying to reconcile the comments around.
Cost impacts, peaking.
It sounded like soon in two Q I didn't know if that was on an absolute basis or relative to your margins given pricing power kicking in and then the 400 basis points. It just seems like with.
Lumber and panels, where they are today and inflation and some other things you know labor land.
Building materials I know some of the other.
Categories don't necessarily make up a ton, but theyre all inflating debt.
That sounds a little quick and low in terms of the peak on magnitude of cost inflation can you just elaborate a little more on them.
Oh, yes, I threw out 400 basis points, what I am talking about is we see.
What's coming in.
Down the pipe from a cost per se perspective, which we now on ended the year, it's not necessarily going to be tied to woods.
And our backlog for example in Q2 those costs are generally known yeah I think.
Mike the differences with the exposure that we had in the backlog. So when you think about kind of where we go from here.
It's how we've been able to adjust price to overcome it and have the greatest pressure. So there's a four percentage point David from here right. So the greatest pressure Mike was really the first half where we brought in a big backlog and when you think about the impact for the balance of the year, we actually think we.
We're incredibly some changes and we are seeing advantages of our new size as well.
That is helping us when we go to the table to negotiate cost.
As much of a simple ask.
For avoidance as anything else.
And getting you know folks in materials onto our site.
Okay that makes sense that's helpful. Thank you.
Thank you.
Our next question comes from Deepa Raghavan with Wells Fargo Securities.
Yes.
Hi, good morning, Thanks for taking my call.
Alright.
Okay.
Can you provide sheryl can you provide any thoughts on the pricing strength and how we should think about you know 'twenty 'twenty two and beyond.
Especially as inflation starts to ease like is there a case to be made for continued but moderating price increases sales.
Wanted to 2% perhaps into next year, even if there is a give back on price.
Because inflation would probably use at that time.
Yeah, you know it's.
It's a great question Deepa on I think we're all trying to understand exactly the longevity of the strength that we're seeing out in the market today.
I would tell you today is we have a M. We have a supply issue in this country and as a result of it it's giving a great deal of pricing opportunity.
As we sit here today, we continue to see those advantages.
Advantages and opportunities really across the board.
It's very hard to say when you look six months or 12 months out.
And new supply comes into the marketplace.
Will they continue at the pace, we've seen my Crystal ball would say, we're going to continue in a very strong market for for some time given the under supply that we have today, but the first that will begin to moderate will be price.
Right. So when I look at the pricing power, we've had if I just take a corridor deeper and say you know on average maybe we're seeing two per cent of a quarter do I think that's long term sustainable.
Robley not.
Do I think that will continue to see pricing above cost.
Robley cell.
But hard for me to estimate what exactly that will look like in 2022.
Okay, that's fair.
I'll, probably ask you about some incremental concerns from buyers, perhaps a need.
I appreciate the day rate sensitivity you gave from Youll land. Its you know its pretty statistically pretty compelling.
And also I also appreciate that the migrant population.
Population, sorry is probably driving some of that price increases in some markets.
But are you hearing about any incremental concerns from your local buyers, especially you know prices have been trending so sharply higher.
Just curious to know you.
At some point in time it needs to have them have an impact on demand and is an immigrant population cannot keep flowing.
Forever. So just curious any incremental concerns you are hearing from local buyers.
So the question yeah. It isn't a good astute question M deep at M.
I guess I I respond on a couple of ways. You know first I would say if theres noise in the system and of course, there's always kind of visa.
I would tell you that that's probably at the more affordable first time buyer.
I'm quite delighted as we look at the kind of dynamic of our first time buyer, it's a very well balance sheet.
First time buyer consumer.
And so we're not feeling a tremendously, but if I look at our most affordable communities I would say, that's where we are very careful in our pricing strategy. The other thing to your point and it's why I highlighted in my prepared comments for California migration.
As in most of our markets as we bring California, and then and you know if I were to point to a market I think like Vegas, I think we're seeing 20%.
The buyers came out of California in the quarter.
Their perspective of affordable is very different so to your point you might see that local consumer that wants to sell their house and even though it's a really good time for cell and they've got appreciation.
In their home.
Having been in the market for so long and Theyre going to look at that price movement, a little different but then they're going to rely on what is it going to cost me on a monthly basis.
And now I'll go back to the statistics I shared with you you know from a year ago, which still more affordable.
So I hope that helps.
No that's helpful. Thanks very much.
You bet.
Our next question comes from Ken Zenner with Keybanc.
Good morning, Sheryl Good morning, Dave Good morning.
I appreciate you guys time here and I'll just have two simple questions. The first one is could you talk about the auction.
And youre seeing them generally if that's margin accretive for you and then the second question is a broader one but.
What a year to be integrating on.
William Lyons and with all the integrations you've done when you take a broader look at your kind of returns.
With just under it was about four years land today, what do you think is the biggest driver that you guys are going to focus on to improve your asset turns. Thank you.
So I'll start with on the option side.
I would say that's holding in very nicely.
The margin for options overall are accretive to the homebuilding margin.
Obviously, we try to push that where we can.
But I'm actually very pleased with where it's holding and especially given the price in environment that we're seeing right now.
Right.
Yeah.
Yeah, and if you wanted to be even more specific for you without getting into the crazy detail I mean year over year, we're seeing accretion.
Slight accretion, but it's accretion on a per unit basis.
And as a percentage basis as our ASP continues to grow I think a lot of that is continuing to come from our active adult buyer.
Seeing tremendous strength and I go I think it goes back to the psyche I discussed earlier around the spire and they want what they want they can afford what they want they want it when they go on it and we're absolutely seeing that on in the design center today.
As far as the question around timing of the acquisition.
I think that was one of your questions laid in there yes.
Really just the asset turns.
Yeah.
Yeah.
Hum.
Yes, I just want him on frankly on that question. Just like you guys have done an amazing job given you know lots of operational challenges and even in normal times.
And you guys have done very well during these very difficult times, but as you kind of look out in the next year or two or three.
With your asset turns and inventory turns kind of being at that one give or take level. How do you think he might be improving those is it lowering the land is it somehow making homes faster, which is difficult just trying to think about the capital.
The debt somehow.
Somehow.
Thank you no it's my fault.
We're it's a great question and yes, we're always focused on on asset turns again, our priority is driving returns and that's key.
<unk> talked a lot about auctioning our land more so controlling it versus owning it.
We moved that up to 32%, we're targeting to get to 40% over the next call. It two years.
And with that lightning that balance sheet. It will it will enhance the returns.
We're always aspiring to reduce cycle times and production.
We're looking for ways to improve that constantly but obviously in the market right now where demand is so high.
Labour and materials are so constrained just even holding serve as a win I would say that.
That will start to ease at some point it always does that will just help turns later on.
And I think the key on what they've saying can if there's not a silver bullet here.
When we talk about the term operational excellence, we have to be focused on all of it and thanks for that for the kind words on integration because you know over the last two and a half three years. We've brought in two very large companies and so getting that alignment is probably the single greatest thing we can do it because I can sit here and talk to you about the difference in the mortgage.
<unk> mix, which will allow our terms to move up a bit I can talk to you about the canvas initiatives I've mentioned in my prepared comments about simplification. So we streamline that time from contract start.
I can talk to you about architectural alignment on the land as Dave talked about more off balance sheet. All those things are going to have a play and you're going to see the impact of all of those coming together and that's why we always say do you have as you know 18 months before you really because the first year, you're just burning off.
Really what they had in the pipeline and production you didn't get to influence any of it now what's going in the ground today actually has the benefit of the work that we've been doing until you actually turned for the land you don't get the full benefit because I can't save my way to prosperity, it's really about cycling through the land and bringing new land in.
With the understanding of how you can bring it to market most efficiently.
Thank you.
Thank you.
Our next question comes from Alex Barron with housing Research Center.
Yeah. Thanks for taking my question.
Just wanted to focus on a couple of things one was your land strategy seems like you're on.
Options have been going up recently I'm, just trying to figure out where.
How far are you guys think that could go over the course of this year and the second question I think last quarter, you talked about migration from other states wondering if you can give an update on what youre seeing there.
Sure from a controlled land aspect like I said, we're at 32%, we expect to move that a little bit.
Each quarter, hopefully sequentially, we might see a couple for installs maybe for a quarter, but then picks back up but that's a little bit harder to predict quarter to quarter. Alex. So we're looking more at the end of call. It 2022, where we're aspiring to be at that 40% controlled level, yeah, and I think it's important it's not like this is a new aspirational.
Asian, Alex remember that one we did some of these acquisitions you know I'll go back to a V that really changed our mix and we were happy to do that because of the age and the one that land has been acquired but now we had to start working that back down. So we're just kind of back on track it as far as the migration question, probably the best data.
I can share is in 2020 about 13% of our sales or closings came from out of state and our backlog right now that number is almost 20%. So a significant shift in migration patterns and we're seeing the probably most noticeable increases in Arizona, Nevada, Florida in our Texas market.
Yeah.
Okay. Thank you very much.
Thank you.
Yeah.
And I'm not showing any further questions at this time.
Okay.
Well. Thank you all for joining us today to share our Q1 results.
<unk> talked to you again next quarter.
Okay.
Hello, Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.