Q2 2021 Lennar Corp Earnings Call
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Welcome to and our second quarter earnings Conference call. At this time, all participants are in a listen only mode. After the presentation. We will conduct a question and answer session. Today's conference is being recorded if you have any objections you may disconnect. At this time I will now turn the call over to Alex Lumpkin for the reading of the forward looking statements.
Thank you and good morning, Today's conference call May include forward looking statements and.
Including statements regarding <unk> business financial condition results of operations cash flow strategies and prospects and forward looking statements represent only <unk> estimates on the date of this conference call and are not intended to give any assurance as to actual future results because forward looking statements relate to matters that have not yet occurred. These statements are inherently sub.
2 risks and uncertainties many factors could affect future results and may cause <unk> actual activities or results to differ materially from the activities and results anticipated and forward looking statements.
These factors include those described in yesterday's press release, and our SEC filings, including those under the caption risk factors contained and monarch annual report on form 10-K, and most recently filed with the SEC.
Please note that Lamar assumes no obligation to update any forward looking statements.
I would now like to introduce your host Mr. Stuart Miller Executive Chairman, Sir you may begin.
Good morning, and thank you everyone.
So this morning I'm here in Miami, with Rick Beckwitt, and Jon Jaffe, our co Ceos and co president.
Diane Bessette, our Chief Financial Officer, David Collins, our controller and.
And vice President Bruce growth.
And our financial services and of course, Alex who you just heard from.
It's been awhile since we've done and earnings call together altogether, but.
But we're all here and happy to be returning to normal.
So todays call is pretty straightforward, so I will try to keep our remarks as brief as possible.
And leave time for your questions and let me give a macro and strategic Lenoir overview.
And Rick will talk about market strength community count and our growing single family for rent strategy and John will update our adjusted and time land strategy supply chain production and construction costs.
As usual Diane will give detailed financial information highlights and guidance and then we'll attempt to answer as many questions as possible. Please limit questions to just 1 question for customer and 1 follow up.
So with that let me start and I want to start my remarks today with a big shout out to the entire Lin our operating team. There is simply no way to report on quarterly results without starting with the engine that produces those results.
The market conditions have made these the best of times and the housing market.
These times have their challenges as well.
We're forming and these best of times. It is hard grinding work that requires the coordination of our first class hands on and engaged management team working in close partnership with extraordinary associates, who care deeply about our customers and our company and we have nothing on the field and achieving those.
<unk> results.
I'd also like to give a.
Shout out to 1 person in particular and that is our chief operating officer, Fred Rothman It.
It is noteworthy that Fred is not with us here in the room today.
This is because he is probably out and 1 of our divisions.
Listening with the management team there.
And he is connecting the dots between their performance and the performance of the company and the articulated strategies of the company.
Key is with the people.
Recently, we had a fortune magazine article written about the company.
It wasn't pictured nor interviewed because he was busy with the people that make things happen. In fact bread is the every person of lenore not pictured not interviewed no limelight no fanfare, just heads down and doing the work that makes this company great. Thank.
And Fred you make us proud.
The associates of l'amour from.
<unk> 2 financial services to Linux to the outer reaches of our ancillary business segments performed the impossible on a regular basis.
They care for all of our core constituents, our customers our shareholders, our building partners and our community as well as caring for each other.
The harmony and camaraderie and Linda is and itself a re.
Real source of pride and that drives us all to excellence and our business to innovation to stay at the cutting edge to integrity and everything we do to shared prosperity across our communities with our money and our time and coordination with our <unk> Foundation.
And I know why join and everyone.
I know I joined everyone in this room today, and saying a big thank you to our associates and telling our shareholders bondholders analysts and investors that we here in this room are proud to have the privilege to present their results to you today.
Now as I've already noted from a macro perspective, the housing market remains very strong as these are the best of times demand has continued to strengthen while the supply of new and existing homes has remained constrained.
New home construction cannot ramp quickly enough to fill the void of the production deficit that has persisted over the past decade and.
And while some question whether that deficit is 1 million homes or $5.5 million homes. The bottom line is the supply is short.
Land labor and supply chain are all limiting factors and the drive to meet current demand. So supply is short and is likely to remain that way for some time to come.
Even though home prices have moved much higher and interest rates have moved slightly higher overall affordability remains strong.
Interest rates are still lower than they were a year ago and personal savings for deposits are strong.
<unk> seem to be rising faster.
Faster than monthly payments.
Millennials are moving out of their parents homes, and forming families apartment dwellers or finding a first time home and demand is strong and growing yesterday's first time homes are selling at higher prices and that equity is enabling first time move ups yesterday's move up home and selling at a strong price and.
And with increased equity, enabling customers to consider and purchased a larger home the upward spiral of a strong housing market is in full swing.
Additionally, the <unk> buyer and single family for rent participants are providing additional liquidity to the marketplace to purchase and sell homes as they evolve and provide ever more frictionless transactions there.
And they are also solving important industry problems that have needed solutions for a very long time.
The buyers led by open door are becoming more than just a home sale option.
And ever more effective and instrumental convenience provider as the coordination of the closing of a new home is being complicated by supply chain disruption.
Expected closing dates move and the customer and customer plans are disrupted.
The fragile dance of selling and old home, while closing on a new home becomes frustrated by these delays.
Open door and other ride buyers have developed flexibility programs that are designed to bridge that gap and simplify unpredictable delays.
I buy our value proposition is more compelling than just are ready and convenient homebuyer. It is becoming the core of our coordinated closing without double moves for double housing costs. The convenience factor is becoming a real value proposition in and of itself.
The single family for rent participants are making a single family home lifestyle accessible to more families to working families.
Although higher home prices have exacerbated the well documented affordability crisis across the country. The solution is to build more homes and make a growing portion of that housing stock available to for more families to rent if they can't meet the requirements for home ownership.
This is simply a social equity program that enables better and housing for more families and more diverse families without weakening the mortgage market.
Professional ownership.
Professional ownership of homes enables renters to access a single family lifestyle, while they build the credentials to own and while commercial and professional owners manage the risk profile.
Better housing for families produces better outcomes for families and the industry as we re wiring to make better housing accessible and affordable for more families and Rick will cover this in more detail shortly.
The housing market is not only very strong but it is also going through some very interesting interesting structural changes that will promote stability and the market and extend housing benefits to the breadth of a diverse society.
And I buy your states space promote for liquidity frictionless transactions and enables mobility, while professionally owned single family for rent is providing workforce housing with social equity and upward mobility that has never existed before.
These changes will also act as circuit breakers for the cyclicality cyclicality of the housing market in the future.
But for now the housing market is strong while it is evolving and some very constructive ways.
So in the context.
And.
A very strong overall market conditions low nor is very strong second quarter results reflect a lot of hard work and a consistent and focused strategic plan.
We remain focused on orderly targeted growth with our sales pace tightly matched with our pace of production.
We have limited growth as the top line.
And in favor of and even greater growth at the bottom line, we focused on gross margin by selling and step with production, while controlling costs and reducing our SG&A.
We have built adjusted time delivery system for land at the front end and we have built adjusted and time delivery system for our finished homes at the back and with our single family for rent program.
We are focused on cash flow debt reduction and stock buybacks land owned versus controlled return on capital and return on equity and of course on innovative technologies.
And we've carefully managed and already stressed supply chain by maintaining our delivery targets for the year, rather than increasing them, while we focus on delivering high quality homes to our customers.
All of this strategic focus shows through and our second quarter results and will carry through the throughout the year and into 2022.
And the second quarter, we grew our deliveries 14% year over year and grew revenues, 22%, which drove a net after tax income increase of 61% and an after tax pre extraordinary item increase of 79%.
Our bottom line increase is driven by our second quarter gross margin of 26, 1% versus 2021, 6% last year and.
And as noted in our press release, we expect our deliveries for the year to be consistent with prior guidance given the stress supply chain, while our gross margin continues to grow consistently throughout the year.
At the same time, we've remained focused on improving our operating efficiency driving our SG&A down to a second quarter, all time low of 7.6% versus 8.3% last year and driving our net margin to 18, 5% this year versus 13, 3% last year.
Alongside our homebuilding operations, our financial services group has continued to exceed all expectations with $121 million of earnings contribution and part due to excellent secondary market execution.
The consistent performance beat from this group however continues to be driven by constant work and rework of the cost structure, even while costs are going up generally.
Together with our asset light focus strong gross and net margins and financial services execution.
We are driving significantly higher cash flow, which is driving balance sheet improvement as well.
And our second quarter, we achieved our 50% owned versus controlled land ratio goal 2 quarters earlier than expected and we reduced our land supply to 3.3 years from 3.9 years last year.
All of these events drove our balance sheet to a 23, 1% debt to total capital ratio with almost $2.6 billion of cash and zero borrowed on our on our bank lines.
Let me briefly focus attention on return on equity return on capital and our inventory turn and I have.
Noted to many of you that we remain very focused on cash flow returns and inventory returns and we have.
Our return on equity stands now at 18, 8%, which is 550 basis points or 550 basis point improvement over last year. Our return on capital is now, 15% and a 500 basis point improvement.
And our inventory turn which is just starting to move now stands at 1 times turn which is up from 9 last year.
While the land, while Diane will give more detail.
And our guidance in her comments, it's important to note that these components are squarely in our focus and they continue to make a compelling case for multiple expansion and.
They are at the top of our mind as we consider configure and size our proposed spin off.
These dramatic points of improvement, which we expect to continue through the year have enabled us to reconsider the size of our spin off and actually aim for a larger asset base in order to for further fortify the spun business occur.
Accordingly, we are now targeting and asset base of $5.6 billion, which is which will leave the remaining lenoir pure play homebuilding and financial services company with an appropriately liquid balance sheet and no material losses reported earnings.
We continue to believe that the best way to enhance <unk> business model is as a standalone pure play asset light high inventory turn homebuilder manufacturer and financial services company.
Aside from size, we have very little to update on the spin this quarter as noted last quarter. The new company will be configured as an independent and active asset management business that raise third party capital to support our ongoing business vertical.
2 of these verticals have raised third party capital and have already raised third party capital and our active asset managers, that's LLC, our multifamily platform and <unk>, our growing single family for rent platform.
Both of these platforms are neatly configured as independent self sustaining operations. Additionally, we have a dynamic and growing independent land and land management business and we have a growing technology investment business, which is part of <unk>.
As I noted last quarter. This separation from the homebuilder will enable these blue chip businesses to thrive and excel independently.
And while I'm certain that you all would like a lot more detail you can expect to hear a lot more about the spin and our next quarters earnings release.
So let me wrap up by saying that we have never been better positioned financially organizationally and technologically to thrive and grow and this evolving and exciting housing market.
We have and amazing group of talented associates, driving our business forward and caring about the world around them. We are performing excellently on all metrics driven by strategies that have worked to our benefit.
The market condition remains extremely strong for the foreseeable future as I've noted, we expect a very strong second half of 2021.
While we are not projecting more deliveries given the very tight land labor and materials market, we are projecting growing gross margin and a very healthy bottom line.
As we begin to look to 2022, we see continued strength and the market.
Simply put supply is short and demand is strong.
Some are concerned the demand is slowing and <unk> prices move higher and interest rates move it feels to US net sales are slowing because many sales were made early and building through those sales is slower than expected.
We believe that home production has been constrained for a decade, and we are making up for the deficit now which should keep the housing market thriving for some time to come with that let me turn it over to Ray.
Thanks, Stuart as you can tell from spirits opening comments. The housing market is very strong our team is extremely well coordinated and our financial results continue to benefit from a solid execution of our core operating strategies.
Key to that has been running a finely tuned homebuilding machine, where we carefully match homebuilding production with sales on a community by community basis, and this environment. It makes no sense to sell too far out ahead, because you lose your ability to offset potential pricing cost increases and the sales.
Price increases.
In addition, and this appreciating market with slightly longer cycle times, and we are strategically selling our homes later and the production cycle of the home to allow for further cost protection and sales price appreciation on.
Our first quarter results prove out the success of this strategy as we achieved gross margin increases of 450 basis points year over year.
And 110 basis points sequentially.
During the second quarter, we started 5.5 homes per community, which.
It was a 90% increase from last year, and a 20% increase sequentially.
This production and margin driven sales focused program will drive further margin improvement and increased deliveries in the back half of the year, given our ramp up and starts and the second quarter.
And the second quarter, new orders deliveries and gross margins were up strongly and each of our operating region and.
In addition, we saw strength and all product categories from entry level to move up and and our active adult communities.
And the strength of the market was also reflected and historically low cancellation rate, which was 8.6% and the quarter down 120 basis points from last year and 100 basis points sequentially. This is additional evidence that our buyers have the required down payment and mortgage qualifications to purchase and.
New home.
As we look across the country, we're seeing strength and all of our markets.
And here's some color on some of our stronger markets.
Starting and Florida, Florida continues to benefit from core local demand as well as in migration from the northeast and and the West Coast, which is driving both sales pace and price inventory is extremely limited and buyers and moving fast and go to contract the hottest markets and Florida.
Naples, and Sarasota, and the southwest Miami, Broward and Dade and the southeast and Tampa. These are all markets, where we are the leading builder with the best land positions and.
And the Carolinas, Raleigh, Charlotte and Charleston, and are extremely strong markets benefiting from limited inventory job growth and quality of living.
We are the top builder and each of these markets.
Texas continues to be the strongest state in the country with and migration from the east and West The States Pro business employer friendly economy is driving corporate relocations and a tremendous growth job growth, especially on the technology sales.
State is also benefiting from the recovery and the oil and gas sector. The strongest market in the United States today is Austin.
Notwithstanding an out migration from parts of California, the markets in California are strong.
Driven by the states severe housing shortage, there is more demand and supply making housing the number 1 agenda item for the governor.
The inland Empire, Sacramento, and the East Bay area are the strongest markets all are seeing a migration from the coastal markets due to a higher level of affordability combatted with the opportunity to buy a larger home for the money.
This extra boost and demand combined with limited inventory and great schools is fueling demand in these areas.
And Las Vegas are strong markets, both are benefiting from business friendly environments real job growth and and migration from California.
Vegas is benefiting from the full reopening for the casinos and increased tourism and Phoenix and subscribing due to real affordability.
The Pacific Northwest continues to be strong.
The market has a natural supply constraints and can strength by urban growth boundaries that limit production.
As I said these are some of the strongest markets that there is strength and depth of market across the company <unk>.
Country now I'd like to spend a few moments talking about growth and community count.
Even as we continue to closeout communities and a much faster pace than expected given the strength and the market our community count at the end of the second quarter grew to 1225 communities up 63 communities or 5.4% from the end and the first quarter.
And also still on track to and fiscal 2021 with approximately 10% more communities on a year over year basis. This should position us for consistent continued growth in fiscal 2022.
Finally, I'd like to give you some additional details on <unk> fr when our single family rental platform.
As we discussed last quarter, when our formed <unk> and facilitate a better time delivery of our homes with reduced cycle times and to make the single family lifestyle accessible to more families at.
At the end of the first quarter <unk> formed the upward America venture, which was capitalized with 1.5 billion of equity from Blue Chip institutional investors just after the end of the second quarter.
For our closed a $750 million credit facility with Deutsche Bank, which combined with the accuracy and equity commitments positions. The upward America venture with extremely cost effective capital to acquire over $4 billion of purpose built communities and scattered site homes from Mannar, we expect on RSP.
Capital investment and the venture to be $50 million over the duration of the vehicle.
Since the beginning the upward America venture has purchased 216 homes for approximately $48 million. These towns were located and 18 communities and 7 markets across 3 of <unk> operating regions.
88 of these homes were purchased and purpose built communities and 28 was scattered homes purchased on adjusted time basis from available inventory and on <unk> existing sales for sale communities.
All of these homes fit a pre determined by box and approved by the venture's equity investors.
<unk> facilitate the purchase of these homes FSFR worked hand in hand, with <unk> to develop proprietary technology that produces automated underwriting and pricing that harnesses when our data management and business intelligence systems, along with third party data to evaluate.
Which apple and Orange cones fit within the ventures by box.
At the end of the second quarter. The upward America venture had a pipeline of 2530 for homes under contract located in 2009 communities.
Across 11 markets with a total purchase price of $596 million 20.
<unk> 500 of these homes are and purpose built communities and 34 homes are scattered homes and when our existing for sale communities.
As Stuart mentioned in his opening comments, the social aspect and providing affordable housing and making the single family lifestyle available to more families is a critical aspect to the upward America adventure.
This is proving to be just the case as the average lease to ramp and the portfolio today is 1702 and $29, meaning that our household making $59280 a year or more can afford to live and a brand new home without a down payment.
To put some perspective on this the average teacher salary and 2019 and 2020 and the U S was $63465. This lines up squarely with our goal of providing brand new high quality homes at affordable prices. This is workforce housing.
With a single family lifestyle.
Can we expand on the potential to provide real homeownership to a broader base of families. We are focused on developing a rent to own program for scattered home purchases within the upward America venture.
We are on the final stages of developing this program with giving a lennox portfolio company, giving.
<unk> is a market leader and upward mobility for renters across the country. We expect this program could be up and running and the third quarter.
We're very excited with the progress we've made so far with <unk> the demand for single family rental homes remains strong lease up times are compressing and we have seen real rent growth now I'd like to turn it over to John.
Thank you Rick today, and we will walk you through 2 topics, how we execute on our asset light land strategy for adjusted time delivery system of home sites and how we are managing the current unprecedented challenges of the <unk>.
Hi chain disruptions and labor shortages.
Stuart noted <unk> made significant strides and strengthening our balance sheet with improved cash flow generation, driven primarily by the reduction and land owned versus option and the years of land owned which respectively stand up 50% option and 3.3 years.
And the second quarter, we added about 38000 home sites net to our controlled total and purchased about 21500 home sites.
We began our asset light focus years ago, starting with several large regional land relationships, who own and develop land on monarch behalf. We then created a strategic national process around our approach the first critical step and formulating this approach with the separate land into 3 distinct risk categories.
The first category is for initial land that is ready for the construction of homes to be started.
The second is land other development being ready for the first category is typically less than 4 to 5 years from being ready for construction starts.
Land and the third category is beyond the 4 to 5 year period that may need some entitlement significant planning and has not yet started development on.
After separating land into these 3 buckets. We then match the risk profile for each asset with the right sorts of risk adjusted capital and expertise for.
First category of land is carried on our balance sheet.
As it is the land under the homes. We are building less land has no risk to it and our cash on hand, and revolver are the lowest cost of capital for it.
The second and third categories of land are structured as option agreements with various strategic relationships that have the strength and capital that fit the specific land profile.
Assets that are low and risk profile may go into land banks, which have the next lowest cost of capital other more complex land is a good fit for our large regional relationships.
More recently, we've added significantly larger national relationships structured to match the type of planned asset and also contractually structured option agreements, which will survive potential market shocks that has historically created risk for defaulting on option deposits and to maintain and control of the option land, thus further reducing risk.
The distinct land business is compromised.
This distinct land business is compromised of and operational team with a singular focus on executing our asset light strategy by closely coordinating with our local division teams and our strategic third party relationships. This independent team works to ensure a consistent application of processes and procedures to execute on all of the moving pieces from land on.
Or writing to acquisition development and completion of just in time home sites and importantly, the independent of this team takes the burden off of our homebuilding divisions of negotiating unique individual option agreements with third parties, they're buying thereby allowing our divisions to be laser focused on running our core homebuilding operations. It also provides all of our <unk>.
<unk> third party relationships the ability to work with 1 voice from a large geographically diverse company.
Our focus on separating our land purchases and to these 3 distinct risk buckets has allowed us to secure the most cost effective capital for Legion each land asset as a result were low and <unk> cost and risk associated with purchasing each category of land.
Now I'd like to discuss how <unk> managing the current environment of supply chain disruptions.
We're all familiar with what is occurring and the supply chain has been impacted by the pandemic by the storms in Texas and by the surge and demand from new construction and big box retailers and many manufacturers are finding themselves without for materials and our capacity to keep up with their orders and Additionally, there is a nationwide shortage of trucks and drivers that add to the disruption.
As you would expect a winner we have bought and intense daily focus on managing the situation, we are effectively managing through leveraging our strategic supply chain relationships as well as having the unprecedented internal connectivity between our division regional and national purchasing teams today.
Today, we work very closely with the leadership of our strategic supply partners as a result of having been focused on being their builder of choice over the 5 over the past 5 years.
We are deeply we've been deeply involved and overtime and developing relationships processes and procedures to improve their businesses. This is not just lip service is over the past 5 years when <unk> changed the way we run our business to improve the bottom lines of our strategic partners businesses. Our actions have earned us the right to sit down with our.
<unk> suppliers and find solutions for today's challenges.
Sometimes of expediting orders and even warehousing early deliveries and some cases, it's substituting products, but in all situations. We together with our partners are finding solutions. The net effect of these disruptions is about a 2 week increase to our cycle times.
With respect to our local trade partners the shortage of labor persist now more than ever like the supply chain situation, we have bought and intense daily focus to manage this again, our builder of choice focus for the past 5 plus years and paying dividends and we've also changed the way we do business with our local building trades over this period of time significantly we've refined the force.
Casting and communication of starts and have implemented low <unk> level scheduling program.
And for greater visibility of the upcoming and workloads for our trade partners. Today, we now have real time dashboards showing on exactly how many tests each trade has in the coming weeks and months. This enabled them to accurately plan for their labor needs and keep our job sites productive. We believe these dashboards to be a best in class forecasting and communication.
And solution.
Also significant for both our suppliers and our local trade partners as our share of <unk>. Everything's included program. This has never been more important it simplifies the number of Skus, our suppliers and local trades and need to carry and addition, and this current environment. We've taken further steps to reduce the number of Skus, we use and certain constrained categories. Other.
Areas of focus for us are using our level scheduling dashboards to support our ongoing even flow commitment to our trade partners along with maintaining our production and first focus on matching sales to starts as Rick discussed.
Turning to the cost impacts from the combination of supply chain disruptions, despite and lumber and labor shortages are construction costs and the second quarter were up 3.9% sequentially and for 5% year over year. However, even though construction cost increase day decreased as a percentage of revenues from 41, 8% and 44.5.
And 5% sequentially and year over year, respectively down to 41, 3% and our second quarter for.
With respect to lumber specifically, we all know that lumber reached an all time highs, but for very recently coming off of that Q.
Q4 of 2020 is when we saw the first significant increase and lumber costs, which impacted primarily our Q2 deliveries for <unk>.
Lumber increases which occurred in Q1, and Q2 will mostly flow through our deliveries and the second half for the year, but as we noted and Diane will cover in more detail, we believe that with our pricing power.
And while more than offset this and we expect to deliver stronger gross margins looking forward, we expect to see some limited relief on our.
And lumber cost for our July starts with more expected expense of lumber works its way through the system and that the current downward trend holds we will see a more significant benefit for August starts.
And lastly, I.
And I wanted to thank the associates of our Nashville land team led by KC Davis, and Jim Barber will close coordination with all of our division land teams effectively executed our land light strategy and just in time home site delivery strategy I also want to thank our national regional and divisional purchasing associates led by Kent Gillis, who have the difficult job on <unk>.
<unk> through these unprecedented supply chain disruptions and so.
And so a tremendous focus effort employees now I'd like to turn it over to Diane.
And thank you John and good morning, everyone. Although you've heard some of our financial results from Stuart Rick and Jon I'll begin by recapping certain Q2, 2021 highlights and then providing detailed guidance for Q3.2021 and high level guidance for fiscal year on 'twenty 1.
So starting with homebuilding for the.
Quarter, New orders totaled 17157 homes, a 32% increase year over year, we ended the quarter with 24741 homes and backlog with a dollar value of $11 billion and 1225 active communities our cancellation rate was 8.6.
Per cent for.
For the quarter deliveries totaled 14493 and homes up 14% year over year.
Gross margin was 26, 1% up 450 basis points from the prior year.
This increase was primarily driven by our continued focus on maximizing sales price while controlling cost increases as John described.
Additionally, on margin benefitted by a 2020 basis point decrease and interest expense as compared to the prior year as a result of our consistent focus on debt reduction.
Our SG&A was 7.6% and improvement of 70 basis points from the prior year. This decrease is primarily a result of our intense focus on incorporating technology to gain efficiencies across our homebuilding platform.
So for the quarter and we generated a net margin of 18, 5% the highest quarter net margin ever reported.
On financial services team also executed at high levels reported $121 million of operating earnings mortgage operating earnings increased to $92 million compared to $81 million and prior year mortgage earnings benefited from an increase in secondary margin title operations total operating <unk>.
Earnings were $24 million compared to $76 million and Macquarie again.
Prior year included a gain of $61 million on the deconsolidation of states title now called zone. Excluding this gain title earnings increased due to growth and both volume and margin as technology initiatives improved agency productivity.
And then turning to outline our other segment during the quarter, we closed on the sale of our residential solar platform for Synovus energy and international and exchange for shares and that company.
At the time of the closing we recorded a gain of $151 million.
We are required to mark to market, our investment needs for Nova as well as our investment and open door, which went public and our first quarter at each quarter and based on their stock prices at that time, Accordingly, we recorded mark to market losses, and the second quarter of approximately $276 million.
And now turning to the balance sheet.
We ended the quarter with $2.6 billion of cash and no borrowings outstanding on our $2.5 billion revolving credit facility, we continue to execute on our strategy to become asset lighter by developing adjusted and time delivery system for on land and homes, improving returns and generating significant homebuilding cash flow.
At quarter, and we owned a 189000 homesites and controlled 192000 Homesites.
This resulted in our year supply owned decreased to 3.3 years from 3.9 years and the prior year and our homesites controlled increasing to 50% from 32% and the prior year, thus achieving our controlled percentage growth midyear instead of and India.
All of this progress resulted in achieving a 20% return on inventory excluding consolidated inventory not owned and is consistent with our intense focus on increasing all of on returns.
During the quarter, we paid dividends totaling $78 million and we repurchased 1 million shares totaling 98 million.
And at quarter and homebuilding debt to total capital was 23, 1% down from 31, 2% and the prior year.
After quarter and in fact, just this week. We retired early at par on 300 million 6 <unk> senior notes that were due in December 2021, further reducing our senior note balance and saving about $9 million and interest and our next maturity $600 million due in January 2000.22020.
2 is a 3 month par call, which we will utilize to prepay those notes in October of this year.
After that payment we will have no senior note maturities until October 2022, and.
And just a few final points on our balance sheet, our stockholders' equity increased to approximately $20 billion from $17 billion and Q2 of the pioneer and our book value per share increased to $62.68 and.
$52.98, and the prior year and.
And finally last week, we were upgraded to investment grade by S&P. We are really pleased with the rating agency upgrades. We have achieved in recent months and are now investment grade and all 3 with all 3 agencies.
So in summary, our balance sheet is very strong and we will of course continue to remain focused on generating high returns for our shareholders.
So with that brief overview I'll now turn to guidance I will first provide detailed guidance for the third quarter and then some high level guidance for the fiscal year, starting with homebuilding, we expect Q3, new orders to be and the range of 16000 to 16300 homes and our Q3 Q3 deliveries to be on the range of <unk> <unk>.
<unk> thousand 800 to 16100 homes.
Our Q3 average sales price should be between 420 and 425000.
Specced on gross margin to be and the range of 27 to 27, 5% for Q3, and we expect our SG&A to be and the range of $7.3 to 7.4% and.
So the combined homebuilding joint venture and land sale and other categories. We expense, we expect a Q3 loss and the range of $10 million to $15 million and then looking at our other business segment.
And for financial services, we believe our financial services earnings for Q3 will be and the range of $95 million to $100 million and for our multifamily operations. We expect a loss in the range of $5 million to $10 million.
And so the law and our other category, we expect a loss and the range of 10 to 15 million note that this guidance does not include any potential mark to market adjustments on our current or future publicly traded technology investments, we expect our Q3 corporate G&A to be about 1.4 percentage of total revenues.
And our charitable foundation contribution will be based on $1000 per home delivered fourth quarter and <unk>.
Our tax rate to be approximately 22, 5% and a weighted average share count for the quarter should be approximately 310 million shares and so when you pull all this together this guidance should produce and EPS range of $3.7.
To $3.32 per share for the quarter.
And now let me provide some high level guidance for the fiscal year, we still expect as I mentioned, our deliveries to be between 62000, 64000 homes, but with and now higher gross margin guidance of 26, 5% to 27% for the year and and even more efficient operating platform with SG&A guidance.
Of 7.3 to 7.5% for the year, we believe our average sales price for the year will be about 420000, and we still expect our community count to increase approximately 10% year over year by year, and our financial services earnings will be and a range of $460 million to $470 million.
And finally on tax rates should be about 28, 5% and so.
And as we continue to execute our core operating strategy to maintain a strong balance sheet and remain focused on cash flow generation and returns we on.
And well positioned for an excellent year and with that let me turn it over to the operator.
Thank you we will now begin the question and answer session of today's conference call. We ask that you limit your questions to 1 question and a follow up question until all questions have been answered if you would like to ask a question. Please on mute your phone and press star 1 and record your name clearly when prompted if you need to withdraw your question and at any time you may use.
<unk> again that is star 1 to ask a question and our first question comes from Michael Rehaut from Jpmorgan. Your line is open.
Thanks.
Good morning, everyone and thanks for all the details always true.
Perhaps on the results for <unk> as well.
First question I, just wanted to hit on probably the number 1.
Excuse me area of concern today, which is around demand trends and.
And I think there has been.
Concern specifically around the potential for demand slowing a little bit.
In the face of the extraordinary amount of home price appreciation that's occurred over the last several months.
Stuart you mentioned in your prepared remarks debt.
You that sales have been slowing more due to.
And in effect production constraints and managing the sales pace.
I was hoping for any sense of how you view demand as it progressed throughout the quarter.
And what makes you comfortable around the idea that.
Overall, the demand backdrop remains not only robust, but it appears still well in excess of available supply.
So.
Let me start with a notion proposition that the market has been extremely extremely hot.
So when you go from extremely extremely hot to extremely hot.
That's net.
Let's say.
A step down that is really quite acceptable it's actually.
A little bit better and of course.
And as pricing goes up.
People.
Fewer people can afford.
So.
And I would just say Mike debt, while the market might have a mild cooling. It is it is just from such a high level.
That <unk>.
Demand is still well in excess of supply and we see this on the ground at our welcome home centers on a regular basis and this was not in any specific market. It really is across the country.
So when we look at the the temp.
Temperament, the tempo of sales and our welcome home centers the traffic Thats coming in the discussions that we're having.
Still seeing very strong demand.
And we still see very limited supply.
And we recognize that the country and the production of housing has been and deficit for the better part of a decade and we can argue whether the debt. The deficit is 1 size or another I think that there are a lot of competing views on that.
But still.
Based on what we see and the market.
And the debt.
The logic that we're applying to what we've seen over the past years and the appetite of the buying public the millennials that still have income out of their parents homes.
Think theres, a very very strong demand profile that is out there for an extended period of time.
Yes, I guess I would add to that Michael debt. If you look at the quarter, we sold 17000 plus homes during the quarter and the variability between the months, where it's plus or -100 columns. So we've really seen no impact.
Associated with the cooling.
And again for us that ties into our match.
<unk> sales to production, we're able to hit exactly that pace as Stuart said when you go from very very hot very hot that's still well above the levels were at a year ago, which were very strong.
Okay.
Right right that all makes sense and thanks for that color.
Secondly, I think perhaps the other key area of debate out there right now is around the sustainability of gross margins and <unk>.
With with the success that you've highlighted this year in terms of.
Managing sales pace and.
And opportunistically improving margin and obviously a part of that is.
To cover cost inflation, but you've been able to been able to do well in excess of that.
Interesting right now that the gross margins you are projecting for 'twenty 1 are in excess of the prior peak margins in 2005.
And interestingly you are on track to have revenue.
Homebuilding revenue more than double 2005 and.
And so you'd think that there are scale benefits certainly associated with that.
But I was wondering if you could give any perhaps.
Thoughts on.
<unk>.
And how you think about gross margins going forward over the next couple of years, obviously I'm not asking for guidance for 'twenty 2.
But just more broadly.
When you think about the gross margin levels that you're generating for this year what might be the puts and takes outside of sales incentives which are hard to.
Predict how.
How you see gross margin, let's say this cycle and perhaps over the next couple of years versus the last cycle.
So look at it.
Let's let's take out.
On.
Just the.
The volume component.
Improvement in margin and then if you if you look at the composition of our margin.
It is a combination of.
A lot more efficiency and the way that we're managing our company the technologies that we're engaging in and incorporating into the way that we're running our business.
On the efficiency of our land program just in time delivery of land.
And frankly.
And emergent inventory management component of our single family for rent.
And there were tremendous efficiencies that we are embedding and the core operation of our business and.
And we think that these are becoming more and more important.
The way that we're managing our supply chain.
As a matter of absolute efficiencies being brought into the way that we're operating our business.
And youre going to see that Hasnt.
Hasnt company and hopefully as an industry are recasting the cost structure, all the way from heart costs labor materials to the softer costs around SG&A. We're rewiring the way that this business operates to the benefit of a lower cost structure.
And and opportunity to maintain good margin and still bring affordability to the housing market.
And I think that Thats been a.
And extreme part of our program and do want to highlight that additionally.
When that's back wind at our backs is our reduced debt level as we bring debt down we have less capital.
And that's continuing to help our margin picture and we expect to continue to bring net debt level down.
So all of the components from technology and the way, we run our business debt levels.
The way that we're just we're becoming more of adjusted and time program. I think is a protective coating around margins for the future and we're pretty optimistic about where we're going.
Total only add that as I noted in my comments.
And with a focus on purchasing we've brought our direct cost down to <unk> 41 per.
Sorry, 41% of our.
Revenues and so look at that ratio.
And we've got a lot of room to go before the lines cross between revenues coy off and cost to be able to maintain our margins.
And I guess the final point I'd make is if you look at what we're building today compared to that 2005.2006 timeframe. Our homes are so much more value engineered and efficient to build for the cost structure associated with the production of those homes.
Significantly different and the last cycle.
Alright, let's go alright, thanks for everybody.
Net.
Thank you. Our next question comes from Stephen Kim from Evercore ISI. Your line is open.
Yes, Thanks, a lot guys.
And just say that I think people would really love to hear a little bit about the spin co and particularly what you think the book value reduction would be when you spun it off and thank you talked about the assets, but the book value I think would be important.
But my questions are going to focus on non core homebuilding business.
And this environment, where you are deliberately and some cases holding back sales to Asia. Your work in process inventory. It seems like the best indication of future sales isn't actually the number of homes are selling today, but how many homes you're building.
And given that I noticed that your starts and <unk> were up about 28% from <unk>. The nations starts were only up 7% sequentially not seasonally adjusted so clearly youre gaining a lot of share.
You have started I think the actual number was like over 20000 units and the quarter.
And I would think your production capability should increase from here because your community accounts, increasing so my question is basically.
Is it reasonable to think that before too long your closings should be able to exceed 20000 units and a quarter.
Well.
Let me, let me give a couple of corrective pieces.
On.
First of all Steve and most importantly, we never deliver units, it's always homes at Lamar and so.
Got to get that 1 right number 2 on <unk> on <unk>, when we talk about a spin in terms of dollars, we're talking about book value.
So.
When you asked I think that when you ask.
The question, which we won't hold that as 1 of your questions about spin co and the impact to book it as a direct 1 to $1.
<unk>.
Dollar amount that clear yes.
Yes. Thank you.
And then.
As it relates to our starch or starts.
I think we are at 19.5.
Not over 'twenty.
But I'll, let Jon and Rick address the question.
Let's see if we have been.
We're very laser focused on our even flow production and just gradually ramping that up to the increased art level that you noted and.
And that ultimately does flow through.
As I noted, we're seeing about a 2 week cycle time delay so it's not they're going to perfectly flow through.
And.
And we should see and subsequent quarters are deliveries matching net store pace.
And just a further what John said, we purposely did start a higher number of homes and the last quarter, because we've seen demand and.
And so if you look at it from a start sales differential was about 2500 more homes started and soul, but we could have sold all of those homes. We're just choosing to sell them later and the construction cycle and order to maximize margin and to take advantage of 8 and more finely tuned <unk>.
Livery cycle.
Yeah, absolutely makes sense.
<unk> strategy I would say.
The second question relates to home prices I think the most striking development across the market has been this massive search and home prices and not just that you're experiencing but across the market.
According to some measures retail pricing is up 25% year over year on.
And people here Thats and the instinctively. Thank you for setup for home prices to fall and the future.
Which by the way it would set off a pretty bad chain of events have happened.
Our own view is that the price jump as a correction rather than an overshoot. It's the result.
Years of on your supply and pent up demand and not just low interest rates and so it makes it very different from like Oh, 5 like when demand was very speculative and supply wasn't constrained.
And I think people would really like to hear from you and how you see the longer term outlook for pricing are we seeing a blow off peak like what happened recently and the lumber futures or something.
Or have we found a new level of home price if that can be resilient in the face of potentially higher rates.
Hello.
From everything that we're seeing and the field I think that where we're just hitting a new level I think.
I wouldn't have thought of it as a correction, but the way that you've said it.
Think that that makes sense I think that home prices are and have reached.
A point and are continuing to grow by the way. This is not this hasnt slowed right.
But.
And the home prices have clearly are reaching a point where.
Where it is kind of a correction to a higher price level.
Its stagnated for a very long period of time as we went through the underproduction years, and maybe the mortgage market kind of disabled.
The production and the debt.
Demand for homes.
Homes or certainly early after the downturn, but.
And you have this really interesting time, where.
Not only has the mortgage market normalized and I think normalized and a very credible way very protective of that mortgage market. But you also have this really interesting demand coming from single family for rent and there is some there is some questions around single family for rent and interesting ways, but it's single.
Family for rent is enabling a single family lifestyle to a broader range of people who cannot necessarily acquire the downpayment or meet the metrics that are needed to qualify for a mortgage but certainly have the ability to afford the rent on a single family lifestyle and this notion.
That the way that people.
Live the housing that is available to a broader range of people is.
And it's very predictive of outcomes for families is a really important component that's in merchant and the enablement of the single family for rent business is just enabling homes available to a broader range a bigger part of the population and I think this is a greater good and we believe and I think Rick.
Daylight for that and highlighted it very well, we believe that when we're providing more workforce housing we're expanding the amount of demand thats out there and yes, we're driving costs up or the price of housing up a little bit.
That is driving the cost of housing up because there's more demand and less supply, but at the same time, it's asking the industry to provide more and provide more accessibility and more people I think thats generally great impact for the industry.
Yes, I agree on the steppingstone, there or the single family for rent is really an important development. So thanks very much guys I appreciate it okay you bet.
Thank you. Our next question comes from Alan Ratner from Zelman Your line is open.
Hey, actually it's Ivy Zelman and thank you for taking our questions.
So maybe just to clarify so maybe John you said that youre purposely starting more.
So you can sell later in the process, but your guidance for sales for next quarter just to be clear. It remains the GAAP is still there prevalent. So is that just mean that youre going to hold those or you just don't want to guide to the full production capacity that you can in fact.
Produce.
And we think Thats accurate guidance based on us very methodically scheduling and we're going to sell a home without the same and all markets. It's later and some markets than others.
But as a very carefully very meticulous plan.
Not to sell out ahead of ourselves.
Okay, and just want to make sure. So let me go to a higher level question Stuart for you recognizing that we are seeing inflation robust inflation across the entire ecosystem, including home prices that Steve Kim just addressed and as well as rent inflation, especially single family.
Rent inflation that I think invitation homes and American homes for rent actually at NAREIT.
We're raising on new move in and up 14, 17%, we've got home prices and places like Austin up 25% do you not think that there is going to be some type of affordability for both asset classes that wages are certainly not increasing at those levels.
Where's the ceiling, where it's no longer affordable for a renter or for a homebuyer.
Well look.
Don't think that Theres bath that can tell us where there might be a ceiling.
And and it seems to us.
Net wages are increasing.
And home or the cost of home.
And on and 1 say ownership.
The cost of living.
Is going up at the same time and that defines the low inflationary environment.
But where do you find the affordability.
Rick again did a really interesting job of laying out the single family for rent World is kind of and equalizer and that field and the program that we're really working on and saying, okay. So housing affordability might be out of the reach of some people.
How do we bring it in the reach through a rental program and then how do we start to build a rental program that provides upward mobility. So that that renter can start to become an owner for.
Earning the credentials to get there when you can make single family lifestyle available to our workforce and that workforce starts with a rental and can earn into owning it and it just creates a stepping stone and it enables net workforce to afford debt higher priced home.
And now whereas the top.
Certainly going to plateau at some point, but the question is where is that moment, we're not sure right now we're going to work that work together.
We also remember from a macro view that today. The home is the hub for People's life very different than it was in the past. So it's not just where they live it's where they work that's where the educators with a wreck recreate and post pandemic, that's still going to be the case for the large part and therefore people view the home is more valuable and will put a larger portion.
Of their income towards that more important asset the home.
No that's helpful and just to clarify because we've seen a lot of the single family rental production Thats now being leased up.
And it's comparable on a square footage basis, if not higher on to a monthly payment.
And for sale. So are you, suggesting that your workforce housing that you're providing on the single family rental space is going to be below the monthly payment because of the obviously costs are monthly the consumer and thinks of it as a monthly payment because we're seeing it not only and line apples to apples, but even at a premium. So are you taking a different strategy than your competitors.
Our strategy is to provide a single family home ownership.
Workforce housing for people that debt.
And can afford to rent and qualify for that housing. So if you look at comparable rents and the neighboring areas stacking right on top of low comparable rents are and where and most of the issues. Our IV is and these people.
People don't have the down payment thats required to afford to buy on its not that they can't pay the mortgage payment. They just can't qualify and other ways and.
So our focus is on a monthly payment that's very similar to the mortgage payment and Dave as Rick highlighted without the debt payments.
Great. Thanks, guys. Good luck.
Okay. Thank you.
Thank you. Our next question comes from Susan Mcclary from Goldman Sachs. Your line is open.
Thank you good morning, everyone.
And good morning.
My first question is you talked about the focus that you have on ROE and improving that and when we think back to the last housing cycle ROE where at least and in the mid Twenty's, maybe even the high Twenty's and our model and granted there's changes and the business today relative to that.
And then it was more of an output of what was going on on the housing market. When you think about the focus that you have today on expanding those ROE and all the different elements of the business that are coming together, where do you think your returns can get to this time and how do we think about that path relative to the past.
Well.
Look.
I think that.
I think that 1 of the limiting factors is the fact that the equity is growing at a sizable clip.
And that's a positive for the limiting factor relative to our away.
And at the end of the day, we continue to see growth and our earnings.
And therefore growth and our returns limited by the fact that the equity is growing at.
Sizable clip.
I think you have to think in terms of as we move forward with our spin. It also helps to define the efficiency and.
And the effectiveness of the way that we're running our business and our core homebuilding business, where we're able to focus.
And.
And equity base that is just geared towards the homebuilding business I think youll see that return kind of revert back to some of the ROE that define the industry at an earlier time.
So it's a combination of things, but the efficiency that we're injecting and our business is going to continue to grow low returns, which will be even further enhanced by separating of logical businesses for where they can operate most effectively.
Okay.
Paul.
My follow up question is on lumber, obviously, we've seen that come down and the last week or so you talked about the benefits that you expect to see from that and the back half of the year, but can you talk to what youre seeing out there in terms of the lumber market how sustainable do you feel like this pullback is and how are you kind of planning for cost as we think about the future quarter.
And and going into 'twenty 2.
With respect to lumber and <unk>.
Anyone felt that the high level that it was that was sustainable.
As for the perfect storm.
And we've seen and I think at the beginning stages of the pullback and lumber costs.
On a pullback in demand from the big box retailers of the do it yourself market.
Postponing projects for 2 reasons, 1 is for post pandemic and spending money and their time elsewhere.
And they didn't want to pay that high cost so theres been a pull back on demand on.
And the lumber supply chain, which is now starting to bring costs down from from the unsustainable levels.
And so as.
As we think about it every 10% reduction and.
And random lengths.
Equates to about plus about $1700 over our average size home.
And for for.
For OSB.
About the same about another $1700 per home.
So as you can see a drop from the level of that and Ohio 2500, we'd expect probably on.
Our August starts to see a benefit of 2 to $300.1000 board feet and random lengths.
OSB.
Less and that is I would start coming down yet, but it should follow suit.
Okay. Thank you very much.
Thank you. Our next question comes from Truman Patterson from Wolfe Research. Your line is open.
Hey, good morning, everyone and.
Thanks for taking my question so.
Wanted to follow up a little bit, but ask about affordability and a little different way. So very very strong gross margins strong pricing fourth quarter. Gross margin suggests that you all are more than covering peak lumber costs right and now we've seen lumber rollover. So.
That likely will be able to offset some of these other low cost pressures that are picking up so if inflation aggregator and kind of levels off and the back half of the year, especially as you all are opening more.
Communities just wanted to understand your philosophy on pricing are you all looking to step off the gas to maintain affordability if rates begin to rise or is it truly pricing to the market really without regard for potential rate hikes.
So Jim and the first thing I want to say, thank you for acknowledging our everything's included quarter.
And we will.
Yeah.
Thank you.
Yeah. So so.
Your question is the throw back to discussions that we've had.
And many times over quarters and the past it's been it's been less of a.
A discussion point as the market has evolved more recently, but we're very very focused on our pricing to meet market conditions.
And.
Our dynamic pricing model is all about measuring where the market is and going to the pricing at where the market is currently so the answer is as as prices might fluctuate as.
As <unk>.
Price increases, perhaps moderate or plateau.
Our dynamic pricing model is very much focused on getting us to the exact pricing to reach our.
Our deliveries.
And with where our production has been.
So the answer is you can very much expect that our pricing will moderate as the market moderates or accelerate as the market accelerates can be very tuned into market conditions.
And this is so consistent with everything we've talked about really for the last 3 or 4 years, we've been matching sales with production.
And we thank John and I tanker with where we will sell during the production cycle based on that fundamental demand and the marketplace.
It's a very precise.
On a production driven sales program and we haven't talked about our dynamic pricing program for a while but it's just become kind of part of the fabric of the way, we operate and it's getting better and better with each passing quarter. It's just not.
Top of discussion right now.
Okay. Okay. Thank you for that and then die.
And this might be 1 for you, but $2.6 billion and cash on the balance sheet, we're expecting a lot of free cash flow on the back half of the year next year, well over $2 billion plus right.
A couple part question, 1 what cash balance and we feel comfortable maintaining and then how should we really think about share repurchases going forward either quantitative.
Discussion is it.
Programmatic opportunistic.
<unk>.
Especially in regard with the equity and pulling back recently.
Yes, I think 2 and that lease so we jump back into the market again this quarter with a million shares and I guess my thinking is that it's probably a little bit among both programmatic as well as opportunistic and we're not I mean, I think buying some level of shares every quarter is.
Is the right answer.
However, I think we should also be opportunistic so as Theyre Gibson. The stock then we can take advantage of those gets because we have the cash to do so.
So I think just having a consistent program is first and foremost and most important thing, but youll find that we'll be opportunistic within each quarter to take advantages of whenever the might market might bring to US yes, but let me just say debt with that said from and you bring up for the fact that we have a lot of cash on the book right now and are likely to <unk>.
Generation.
More on the back half of the year isn't it great.
And we've been laser focused on cash flow and <unk>.
And it's really starting to to show just how for how our focus has consistently.
Rippled through our numbers.
I think I think the 1 thing I want to add to <unk> comments.
Mike.
Expect a more bold statement about stock buyback and.
We don't really give color as to where we're going on that as we look ahead, but the thing to also keep in mind is that we're also working with the composition and the size of our spin.
And we are laser focused on the spinoff and we want to make sure that on balance sheet properly supports the extent of what we want to do because we're not just going to it's not just about building and ever better when our homebuilding and financial services group, It's also and.
Look historically, when we spun LNR back off on the and the nineties, we built a great company a durable sustainable company and we expect to do the exact same thing with the spun company here and.
We're enthusiastic about presenting more in the future on that but our balance sheet our cash position.
And the size and scope of the spin all work together, so I would say just bear with us a little bit as we put these pieces together because it all ties together with our stock buyback program.
Okay is there a certain cash balance that you want to maintain to support the core homebuilding operations.
The way, we think about cash is more.
Okay.
We're not going to limit cash flow and we are.
And to that point don't think debt of $50.50 land owned versus controlled program is where it ends we hit our goal early.
And we're still focused on migrating forward Johns articulation of our land strategy and the waterfall of short term medium term long term land and the way that we're configuring to maximize cost of capital and.
And where we put land and how we generate cash flow is something that we work on Rick John myself work on every day. So cash flow continues to be a focal point of this company and churn and just to add also and as I mentioned.
Alongside also with the continued debt focus so youll see us reaching into 2022 with those debt maturities pulling them forward and really getting some.
Positive impact to our margin as we as we have done that and so for punctuation at the end of your question I want to say again. Thank you for the Everything's included call.
Yeah.
Thank you I appreciate it.
Paul's title so good luck on the upcoming quarter and.
Thank you.
Okay. Thank you, Okay, and we will take 1 more question.
Thank you and our last question comes from Jade Rahmani from <unk>.
<unk> Your line is open.
Good morning, Thank you very much.
I appreciate the chance to ask questions I, just wanted to ask at a high level.
And so what extent do you think Linda and particular, but also the major production builders are and control of their own destiny.
You mentioned various factors, including the land strategy relationships with suppliers.
To some extent since new home sales are only about 10% of total aggregate home sales you can tailor the product to the market.
And just overall question.
Do you think debt the company has a price taker of price giver and overall, how would you respond to that question. Thank you very much.
Well, it's great that we're going to get to a metaphysics.
On the call today.
I guess, I guess, I, though always say jade debt.
We're always a little bit of both the fact of the matter as market conditions dictate a portion of what defines what we're able to do but also our ability to work and act within market conditions.
Is in part a driver of how we perform and how our product is received.
And and and.
And the pricing that we get for that so I would say there isn't a binary answer to the question of whether world price taker for a price maker I think and every market condition. There is a dynamic that is in part given to us.
And in part B.
Maximized by us and in that regard.
Tried to be very clear and my comments and I think.
Rick and John as well.
And Diane.
And have all daylight that we're sitting in the midst of market conditions that are very strong.
And and.
And those market conditions, and moving around a little bit, but very very strong short supply long demand.
And thats the market that is given to us, but within the condition of that market.
Probably reporting on numbers, saying that we have maximized for market. That's in front of US. We've made strategic moves that has enabled us to navigate these waters as well as as can be and.
And we think we've done a really good job and we think that we can continue to get better and better.
And at the same time, a price taker and a price maker.
Navigating interesting waters.
That's how I'd answer that I don't know it could give us a little bit of additional perspective and <unk>.
<unk> and dramatically by market, we have some markets, where we're 30% to 40% of the share of the market and in those markets. We added the ability to control things a little bit more and we're setting and the cadence and that market and markets, where we're a smaller percentage, but really pricing to market as we've done.
On.
And for really the last several years, so it really varies across the board depending on and market.
So why.
Why don't we go ahead and ended there.
And let me say just kind of as the last word I want to apologize we tried to keep our remarks brief.
You didn't do a very good job of that but I hope. We gave you a lot of detail. We know we didnt leave a lot of time for Q&A.
That's why we went over a bit.
But we think it is important to get as many questions as we can and of course will speak to many of you offline. Thank you for joining us today, and we look forward to reporting on our progress as we go forward.
Thank you all for participating in today's conference you may disconnect your lines and enjoy the rest of your day.