Q1 2021 M/I Homes Inc Earnings Call
[music].
Good day and welcome to the M. I homes first quarter earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Phil Creek. Please go ahead.
Thank you. Thank you for joining us today on the call is Bob Schottenstein, our CEO and President Tom Mason EVP, Derek <unk> President of our mortgage company Ann Marie Hunker, VP, and corporate controller, and Kevin Hake Senior VP first to address regulation fair disclosure we incur.
Bridge you to ask any questions regarding issues that you consider material. During this call because we are prohibited from discussing significant nonpublic items with you directly.
And as to forward looking statements I want to remind everyone that the cautionary language about forward looking statements contained in todays press release also applies to any comments made during this call also be advised that the company undertakes no obligation to update any forward looking statements made during this call on.
I'll turn the call over to Bob Thanks, Phil Good afternoon, everyone and thank you for joining our call to review our first quarter results.
We had an outstanding first quarter, perhaps the best quarter in company history.
Setting records on many fronts, including new contracts deliveries revenues and pretax income.
Housing conditions in all of our markets are very strong.
The robust demand for new housing is being driven by a number of factors, including low mortgage rates historically low inventory levels.
A rapidly growing number of millennials joining the ranks of homeownership.
And a shift in buyer preference away from renting in favor of single family homes.
In addition, the quality of buyers is in as good a shape as we've ever seen.
Our average buyer is putting more than 15% down and it has a credit score in excess of 740.
Taken together all of these factors have created an excellent environment for new home sales that has contributed to our record setting performance.
We are proud of our results as we continue to gain market share and to improve our profitability throughout every one of our 15 markets.
During the quarter, we sold an all time quarterly record of 3109 homes.
49% better than a year ago.
Our absorption pace per community improved significantly to five three sales per community compared to three one sales per community a year ago.
And we continue to experience very strong results with our smart series, which represents our most affordably priced line of homes.
Smart series sales comprised nearly 35% that's total company wide sales during the quarter compared to 30% a year ago and just 16% in 2019.
We are selling our smart series product in all 15 of our divisions and in roughly one third of our communities.
As we've shared before on average our smart series communities are larger with more lots.
And our smart series homes produce better monthly sales space higher gross margins faster cycle time, and overall better returns.
Homes delivered during the quarter increased 35% and were a first quarter record.
Revenues increased 43% and also represented a first quarter record.
Gross margins improved by 420 basis points to 24, 4%.
And our overhead expense ratio improved by 120 basis points.
As a result, our pre tax income was an all time quarterly record of $110 million, 167% better than a year ago with a pre tax income percentage of 13, 3%.
Compared to seven 2% last year.
These strong returns resulted in a 25% return on equity improving from the 22% full year return on equity we had in 2020.
Our first quarter results continued our trend of strong growth in both revenues and earnings.
Specifically since 2013, our revenues have grown at a compounded annual rate of 19% and our pretax income has grown at an even more impressive annual rate of 43%.
Company wide, our backlog sales value at the end of the quarter was a record $2 $4 billion.
82% better than last year.
And our units in backlog increased by 68% to an all time record 5479 homes with an average price in backlog of $433000 nearly 10% higher than the average price in backlog last year at this time.
As I indicated earlier, all 15 of our homebuilding divisions contributed significantly to our first quarter performance.
And as you'll soon hear our financial services mortgage and title operations also had a record quarter highlighted by strong income and excellent mortgage capture rate and very solid across the board execution.
Now I will provide a few brief comments on our markets.
We divide our 15 markets into two regions. The northern region consists of six of our markets, namely Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis and Detroit.
While the southern region consists of the remaining nine markets, Charlotte and Raleigh, Orlando, Tampa and Sarasota and.
In Houston, Dallas, Austin, and San Antonio.
New contracts in the southern region increased 46% during the quarter.
In the northern region, new contracts increased 53% during the quarter.
Our deliveries increased 34% in the southern region during the quarter to 1218 deliveries or 60% of the total.
The northern region contributed the balance 801 deliveries and increase of 36% over last year.
Our owned and controlled lot position in the southern region increased by 35% compared to last year.
And increased by 8% in the northern region compared to last year.
While we are selling through communities somewhat faster than expected, we are very well positioned to handle the current level of demand.
35% of our owned and controlled lots are we on our northern region, while the balance roughly 65% are located in the southern region.
We have a strong land position companywide, we own approximately 16800 lots, which is roughly slightly less than a two year supply.
On top of that we controlled via option contracts and additional 25200 lots. So in total our owned and controlled lots approximate 42000 single family lots, which is just under a five year supply.
Importantly, and worth noting 60% of those lots are controlled under option contracts, which gives them I homes significant flexibility to react to changes in demand or individual or unexpected market conditions.
We had 100 communities in the southern region at the end of the quarter, which is down from 125 a year ago.
In the Northern region, we had 87 communities at the end of the quarter, which is down 11% from the 98, we had last year at this time.
Clearly this decline in community count as a result of our accelerated sales pace, but it's also important to recognize that over one third of our communities are now are offering our smart series homes and that these communities often have more lots in total.
But they also produce a greater sales pace.
We are managing our sales pace as well as our pricing and our communities to take advantage of the strong demand and to assure delivery of a high return on our investment.
Before I turn the call over to Phil Let me just make a few final comments.
Our financial condition is very strong with $1 4 billion of equity at the end of the quarter and the book value of $46 37 per share.
We ended the first quarter with a cash balance of $293 million and zero borrowings under our 500 million dollar unsecured revolving credit facility.
This resulted in a 32% debt to cap ratio down from 39% a year ago, and a net debt to cap ratio of 21%.
We are very excited about our business our financial condition has never been better.
We have important operating momentum throughout the company.
And the quality of our product along with the quality of our communities and our land position positions us for continued growth continued gains in market share and strong results. We fully expect to have an outstanding year in 2021.
With that I'll turn it over to Phil Thanks, Bob as far as our financial results new contracts for the first quarter increased 49% to 3109 on all time quarterly record compared to last year's first quarter 2089, our new contracts were up 68% in January up 21.
1% in February and up 64% in March and our sales pace was five 3% for the first quarter compared to last year's $3 one and.
And our cancellation rate for the first quarter was 7% and as Bob stated, we continue to manage sales pace and returned in our communities closely.
As to our buyer profile about 56% of our first quarter sales were to first time buyers compared to 53% in the fourth quarter of last year and.
In addition, 43% of our first quarter sales were inventory homes. The same as 2000 Twenty's fourth quarter.
Our community Count was $1 87 at the end of the first quarter compared to $2 23 at the end of 2000 Twenty's first quarter.
Breakdown by region is 87 in the northern region and 100 in the southern region.
During the quarter, we opened 21, new communities, while closing 36 in last year's first quarter, we opened 17 new communities.
We delivered a first quarter record of 2019 homes, delivering 46% of our backlog compared to 56% a year ago production cycle times are being lengthened by supply issues.
Revenue increased 43% net in the first quarter, reaching a first quarter record of $829 million and our average closing price for the first quarter was 395000.
6% increase when compared to last year's first quarter average closing price of 374000.
And our backlog average sales price is 433000 up from 399000, a year ago and our backlog average sales price of our smart series is 335000.
Our first quarter gross margin was 24, 4% up 420 basis points year over year, our construction and land development costs continue to increase with our biggest impact from lumber.
Our first quarter SG&A expenses were 11% of revenue improving 120 basis points compared to $12 two a year ago, reflecting greater operating leverage interest expense decreased $3 5 million for the quarter compared to the same period last year and interest incurred for the quarter was.
$10 2 million compared to $11 9 million a year ago.
The decrease is due to lower outstanding borrowings in this year's first quarter as well as a lower weighted average borrowing rate.
We are pleased with our improved returns for the first quarter. Our pretax income was 13, 3% versus seven 2% a year ago and our return on equity was 25% versus 15% a year ago.
During the quarter, we generated 125 million of EBITDA compared to 59 million in last year's first quarter, and we generated 75 million of positive cash flow from operations in the first quarter compared to using $24 million a year ago.
We had $22 million in capitalized interest on our balance sheet about 1% of our total assets.
And our effective tax rate was 23% in this year's first quarter. The same as last year's first quarter and we estimate our annual effective rate this year to be around 24%.
And our earnings per diluted share for the quarter increased to $2 85 per share from $1 nine per share last year now Derek <unk> will address our mortgage company results.
Thanks, Phil on.
Mortgage and title operations achieved record first quarter results in pre tax income revenue and number of loans originated.
Revenue was up 120% to $29 6 million due.
Due to a higher volume of loans closed and sold along with higher pricing margins than we experienced last year.
For the quarter pre tax income was $19 $7 million, which was up 250% over 2000 Twenty's first quarter.
The loan to value on our first mortgages for the quarter was 84% the same as 2000 Twenty's first quarter.
78% of the loans closed in the quarter were conventional and 22% FHA or VA is.
As compared to 72% and 28% respectively for 2000 Twenty's first quarter.
Our average mortgage amount increased to $328000 compared to $306000 last year low.
Loans originated increased to a first quarter record of 1575 loans, 39% more than last year.
And the volume of loans sold increased by 50%.
Our borrower profile remains solid with an average down payment of over 15% and an average credit score on mortgages originated by <unk> financial of 746 up from 745 last quarter.
Our mortgage operation captured over 84% of our business in the first quarter, which was in line with 85% last year.
We maintain two separate mortgage warehouse facilities with combined availability of $215 million that provide us with funding for our mortgage originations prior to the sales to investors.
At March 31, we had a total of $176 million outstanding under these facilities.
Which expire in May and October of this year.
Both facilities are typical 364 day mortgage warehouse lines that we extend annually.
We have requested an extension of the warehouse agreement that expires in May and we expect the banks to approve the extension shortly with closing anticipated prior to exploration.
Now I'll turn the call back over to Phil Thanks, Derrick as far as the balance sheet. Our total homebuilding inventory at March 31 was $2 billion, an increase of $138 million from our sturdy one 'twenty our unsold land investment at March 31 of this year is $742 million compared to 809 million.
On a year ago at March 31, we had $426 million of raw land and land under development and $316 million of finished unsold lots. We owned 4227 unsold finished lots with an average cost of 75000 per lot.
And this average lot cost is 17% of our 433000 backlog average sales price our goal is to own a two to three year supply of land.
During this year's first quarter, we spent 92 million on land purchases and 71 million on land development for a total of $163 million, which was up from $138 million on last year's first quarter and in the first quarter of this year, we purchased 2500 lots of which 75% were raw.
<unk> in last year's first quarter, we purchased 1800 lots of which 70% were Raul.
In general most of our Smart series communities, our role land deals and have above average company pace and margin.
We have a strong land position at March 30, <unk> controlling 42000 lots up 24% from a year ago and have the lots controlled 40% of our owned about a five year supply and at the end of the quarter. We had 98 completed inventory homes and 708 total inventory.
And of the total inventory of 423 homes were in the Northern region and 285 are in the Southern region. At March 31 last year, we had 556 completed inventory homes and 1322 total inventory homes.
This completes our presentation, we'll now open the call for any questions or comments.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
Our first question comes from Jay Mccanless with Wedbush. Please go ahead.
Hey, good afternoon, congratulations on a on a really great quarter.
Just two or three questions yeah absolutely.
And understanding that the February weather, probably had an effect on everybody but.
Can you talk about.
The sharp increase in order growth from February to March and frame. It in the light of metering sales or trying to slow sales. So the construction can keep up because.
And not to be smart about it but when we hear this from the builders that they are trying to slow things down and then they put up such really great sales numbers.
When is that going to show up in the order growth or when is that going to show up on the closing growth numbers are in the closing numbers over the next couple of quarters.
Jay as far as the orders you know we were very pleased with a 3100 for the quarter and each month was about 1000. So just from a numbers standpoint, it really was.
Pretty consistent.
From a closing standpoint, we were very pleased with our closing number we probably had $25 50 closings delayed from Texas due to the crazy weather they had.
As Bob said, we feel really pretty good about the way, we're managing sales and also the construction side of the business and so forth we have a very very strong backlog.
Of course, the backlog conversion rate is going down because we don't have as many specs in the pipeline to close quickly plus it just takes a little more time to manage a bigger backlog, but having said that.
We are looking for a strong second quarter in closings.
Yes.
J J I don't have much to add other than.
I think.
The demand was was exceptionally strong and has been for more than probably six months seven months almost be going back to last may actually I didn't really I don't think there was any discernible difference in demand from January to February to March.
Other than may be.
The you know the difficult period and in Texas for about a week or two.
With the electric problems and the bad weather, but.
But.
We're doing the best we can to manage and control.
Doing so because we want to make sure we can deliver homes and timely fashion protect our cost protect our margins and satisfy customers.
Got it yeah, I'm, just I'm, just trying to get a sense of how the pace is going to go this year from from a unit volume perspective, and actually debt. So you touched on closings per month, and that's what I was going to ask next because.
In 2019, you guys did two four on average closings per month last year. It was three two and now this first quarter you closed almost three five homes per month on average in your communities.
On the kind of pace, we should expect for the rest of the year or is that going to have to slow down now that you've sold through most of the spec inventory you have.
I think some of that increase is due to smart series homes, the cycle time for which as you know.
Several weeks less than non smart series and two years ago keep in mind. It was about 15% of our business, maybe a little more today, its 35% of our business.
And also Jay look at closing the last three quarters.
We closed 2000, plus homes third quarter of 20, the fourth quarter of 'twenty and the first quarter of this year, we've been at the run rate of 2000 plus.
So.
As Bob said, we're continuing to do all we can to develop too.
<unk> delivers many quality homes as we can and we should have a strong backlog to do that.
Yeah, I guess and then the next question I have is when we think about the gross margin.
It sounded like you guys closed out a significant amount of communities. This quarter was this some of the older Smart series communities in Texas.
Or in some of your other markets that drove the margin this higher was it price mix.
What drove the gross margin outperformance and how likely is debt to continue.
Well, we don't give margin guidance, but.
My answer to that would be demand is driving the margins more than mix or land that we bought a long time ago.
We haven't had mothballed ground for.
I don't know that we've ever had but certainly not for a decade.
I can't remember, if we ever had it frankly, but.
My point is I think that the 24 plus percent margins are being fueled by the economy by the market that we're operating in and based on what we know today.
Unless things were to slow down.
Rates were to rise noticeably or commodity prices were to just go really crazy.
If something really unexpected were to occur.
We would expect margins to continue at this pace for the near term, but we don't have any guidance on that.
But in terms of expectation, that's what we'd expect.
Understood.
And then the last question I have on on the last conference call.
You all sounded reasonably confident that you could just.
Maybe start to show some year over year community growth by by year end 'twenty. One how are you feeling about that now and.
Any any any ideas or cancer.
Do you think we might go in 'twenty two in terms of the community count.
I'll say, one thing and then let Phil we do.
Don't have guidance on that which I think probably frustrates people, but the fact of the matter is.
We expect to continue growing.
We expect to continue producing strong returns, we expect to continue to gain market share in our markets.
And that is going to be a combination of continued rollout of smart series, but also opening a lot of new communities as we move on down the road.
You know Jay last year, we opened 69, new stores and as we said on the last call. We intend to open more stores this year than last year, and we talked about the first quarter on this year. We opened 21 versus 17 of last year, we are selling out of stores, a little faster than we thought.
So I think debt.
Having community count growth. This year is going to be very challenging, but having said that with the smart series continuing to be a bigger part of our business with stronger pace and strength stronger margins, but are non smart series also has performed better I mean, one of the big things, we're benefiting from Bob.
Talk about is just the increased penetration of the increased scale. If you look at us in the last couple of years the significant growth we've had in our Texas markets.
Sarasota has been very strong for us our Detroit acquisition is having improved results.
Our Carolina markets, where we were a little bit down and communities are now coming back. So we've had some strong performance across the markets and that improving in scale and gaining market shares really helped our results and we're really focused on continued to improve income and our returns.
Got it well congrats again and thanks for taking my questions.
Thanks. Thanks.
Our next question comes from Alan Ratner with Zelman <unk> Associates. Please go ahead.
Hey, guys good afternoon, and congrats on the great results.
I've got a few questions as well.
Phil maybe I'll kick off with the last comment you made about scale I think as you guys know we think that scale is obviously yeah.
Very important driver of.
Margins in performance across the group and I know you guys have been talking about the focus there for a long time.
And Bob you kind of made a comment that 24% gross margins. It is demand driven and certainly I think that that was the biggest catalyst, but I'm curious if you think that.
Historically, you've talked about this being a 2021% gross margin business I'm curious if you if you assume some normalization in pricing power at some point in the future do you feel like you guys have done enough on the business in terms of taking market share gaining scale, where structurally perhaps your margins could be a little bit higher than that 20%, 21% range goes.
Forward once you kind of get through this this crazy demand period that we're in right now however, long it lasts for.
Well the adjusted to you Phil So you go first and then ill.
Uh huh.
Obviously, we're focused very much on improving margins in all of our markets.
With more volume.
Hopefully, we'll be able to get the better margins because when you have fewer communities. You know you tend to be kind of on a treadmill, maybe you cannot force sales a little bit to get the volume you need.
So we do think that our scale will help us improve margins.
We always try to stress.
We think our execution with our 15 area presence has been very very strong.
Sure where market pricing make sure we open communities right. There's no reason to get too far out ahead of our cost.
Execution really really matters, so when youre dealing with $3 billion or four 1 billion on revenue and <unk> at quarter means a whole lot. So we're sure hoping.
Debt, we're going to be able to improve our margins.
And do better than.
The competition.
What I would say is.
I agree with you Alan and that.
Look a year or two ago, we were a 6000 to 7000 run rate builder today were north of 10000 run rate.
And we ought to get better pricing on certain national nationally purchased items. If our business is 40% larger we shouldnt be paying the same thing for buying 40% more of the same item we have a great national purchasing program I think its outstanding but if it stands the <unk>.
And if you are buying more you ought to have a little bit more leverage maybe to get a little bit better pricing on certain commodities and thats something were very focused on the other the other issue is is.
The below the below the gross margin line benefits of that scale, which I think are the ones that are most important.
About 13 plus percent to the bottom line this quarter last year at this time, we felt pretty good about ourselves we brought 7% to the bottom line now part of that is the.
400 basis points of its in gross margin.
But the other 250 to 300 is below the line leverage so.
You know right now.
We're very excited about the opportunities that scale gives us.
We've known and believed and hoped that it would be coming and it is and as we look out over the next several years.
While we don't know of housing is going to stay as strong as it is now generally speaking, we're very optimistic about the industry.
We believe there hasnt been a shortage of homes produced for many years I don't know if its $3 5 million less than we needed or $5 million or $1 million, but I also know that the group that has the greatest potential to impact our industry, which I think is the millennials are really beginning to increase their homeownership rate by halves and 1%.
One 5% over 12 month period, and that has a lot of home purchasers.
<unk>.
Right now a lot may be more new than used because there's just so few used homes for sale. The fact is I think housing has a lot of room to run.
And.
We are.
We're very well positioned on you know whether our gross margins stay at 24% or maybe even go up a little higher here on the near term maybe.
Maybe they settled back maybe they will settle back closer to 'twenty to 'twenty to 'twenty, one that remains to be seen but I think we have a chance as we grow relative to our peers to continue to improve our returns.
Great I appreciate both of your your viewpoints, there and it'll be interesting to see.
Second question I'd love to dig in a little bit on on the production side of things you kind of touched on it a little bit you alluded to production cycle times being lumped into a I was wondering if you could quantify that but your sales pace. This quarter at over five a month is I think a company high and I'm curious.
What are your actual housing starts running at are you starting five or six homes a month per community right now.
And if so can that piece be sustained or even improved and if not does that mean that you have to kind of pull the range a little bit on on how quickly you're selling going forward.
So let me say a couple of things and then and then maybe Phil can really provide a more precise response.
This is probably close to a record pace for us I think youre right I actually did not check that.
Our smart series communities the pace as.
Is slightly greater than six and even though on our non smart series communities. Our paces in excess of five so we're seeing across the board really strong response to all of our communities.
It's important to note because.
For the foreseeable future maybe forever at least half if not more of our business will be non smart just because of the nature of our of our operating strategy not wanting to have too many of our eggs in any one basket.
The.
So I think I think that.
That's part of the pace.
Answer the other thing I'll just point out is our cycle times have been stretched.
And there are probably a little more stretched today than they even were a month or two ago.
The problem continues to give a little worst by days at a time, maybe a week, it's not horrible, but what have we lost bill about three weeks or so yes. It looks like cycle time was up about 10 days against Smart series is a little different than what our non smart is but it is up about.
That and we're kind of thinking it may get a little bit worse than that.
As far as your question from a start standpoint.
Kind of the run rate. These days Alan is we're starting about 900 homes, our math Bob talked about that run rate of 10000, when you cant look at what we're running at right now.
When you can probably that the last year that number was about 700, obviously last year at this time with a lot of things were going on but we do feel good that we've been able to ramp the production side of the business up but again still wanted to make sure we deliver a quality homes take care of our customers.
Overall, we feel pretty good I mean, the deliveries in the first quarter were a little stronger than we thought all things consider with taxes and all the challenges and low cycle. We're gonna have a good strong second quarter hopefully.
Think we're doing a pretty good job as best we can manage and the supply and the cost side jumping around when you look at the cost side. The first quarter every market's a little different there was like a <unk>.
3% to 5% increase on the cost side as far as materials and labor lumber tended to be $5 $6000, a house and again trying to handle that as best we can but overall, we feel like if you look at the margins from the fourth quarter, excluding the impairment we took the margins in.
The fourth quarter were 24%. So this quarter they were up about 40 or 50 basis points. So we felt pretty good about that.
Great well I appreciate all that detail guys and keep up the great work.
Thanks <unk>.
Our next question comes from Alex Barron with the housing Research Center. Please go ahead.
Good afternoon, guys, great job on the quarter.
Thanks.
I have a question regarding interest expense.
I think this quarter you guys expense $8 million the cost of goods sold on the Malian below the line.
And I think your interest incurred is roughly 10 million from going forward is that going to be roughly the amount that we should expect cash.
And cost of goods sold.
And nothing in the.
Under the line.
Yeah, Alex as far as the interest incurred.
We feel really good about our capital structure.
As I said in the prepared remarks, the interest incurred actually what was less than this year than they were last year.
As far as what flow through what line.
And Murray can you help any with that well.
Well I mean, what flow through the line is about as a percentage basis. You can you can kind of keep the same what what below the line is impacted also by land development. So it's choppy you know it depends on how much we have under development how much gets capitalized so it can vary.
Ari, but not by a ton, but going through cost of sales it's about the same percentage.
The total.
Cost of sales.
I guess my point is it seems like you guys are getting to a scale, where 10 million ought to be kind of the ceiling right in other words youre going to start to see some leverage from interest expense.
Yeah.
Okay.
A little bit.
It's hard to I would think we will land a little bit again.
Yes, I mean, you look as far as what went through the interest expense line. It was what $4 million last year, and one or two this year, but yes.
We don't we only have 1%.
The total balance sheet and capitalized interest our interest incurred we feel really good about so.
Hopefully, we're going to get efficiencies there just like we do everywhere else, we are developing a little more of our own loss today than we were a year ago, but overall, we feel pretty good about that.
Yeah.
Okay, Great and then with regards to capital allocation.
I believe you guys.
Sure.
Obviously, you are growing quite a bit so I'm just kind of wondering if you could share your thoughts around.
Youre generating cash it looks like your option more lots.
Is there any thought to do any share buyback or dividend.
Well the first thing.
Last year, we spent about $730 million on land between land purchases and land development, we talked about in the first quarter, we spent more than last year.
Art, given any estimate, but we do expect to spend significantly more this year than last year on land.
So we do need to buy more land to continue our growth.
We continue to look at what we need in the business feel very good about where our leverage is now.
Watch that very carefully, but we will continue to have discussions internally and with our board about possible stock buybacks dividends those type things, but right now we feel like with a little bit of cash and a relatively low leverage that's kind of where we want to be right now.
Al.
We feel good about where we are.
Okay great.
One last one can you guys comment on what percentage of your orders.
Or closings were coming from the smart series versus a year ago same thing on your land holdings and on what percentage of your lots are kind of allocated for smart series versus a year ago. Thanks.
On the sales side.
I think I said in our remarks.
Alex.
35% of our total sales were smart series versus about 30% a year ago, 19% two years ago.
I don't have the closing percentage in front of me.
Do you have the percentage on land holding but I know, it's a little bit hot a third of our total communities our smart series communities.
But they tend to be larger in number of lots. So it could be it would be it would stand the math would suggest that a greater percentage of our lots of greater than one third of our smart series.
Yeah.
Okay, great keep up the good work. Thank you.
Hey, thanks.
As a reminder, if you have a question. Please press star then one to be joining us in the queue.
This concludes our question and answer session I would like to turn the conference back over to Phil Creek for any closing remarks.
Thank you very much for joining us look forward to talking to you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.