Q2 2021 Green Brick Partners Inc Earnings Call
Good afternoon, everyone and welcome to the Green brick partners earnings call for the second quarter ended June 32021.
Following today's remarks, we will hold the question and answer session.
As a reminder of this call is being recorded and will be available for playback.
The slideshow supporting todays presentation will accompany today's webcast and is available on green brick partners website, Www Dot green brick partners dot com for listeners for joining us by teleconference go to investors <unk> governance, then click on the option next day is reported and then scroll down the page until you see the second quarter Investor call presentation.
The company reminds you that the during this conference call. It will make various forward looking statements within the meaning meaning of the safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1095, including its financial and operation of expectations for 'twenty, 'twenty, 1 and the future and anticipated impact of COVID-19 on our future.
Operations, the prospects and other aspects of our business and investors are cautioned that.
Such forward looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those set forth in our forward looking statements. These risks are set forth in our second quarter earnings press release, which was released on Tuesday August <unk> 2021, and the risk factors described in the company's most recent Ana.
The way in quarterly filings with the Securities and exchange for mission.
Green brick partners undertakes no duty to update any forward looking statements that are made during this call.
In addition, our comments will include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by the regulation G. Regarding these metrics can be found in the earnings release that green brick issued yesterday and the presentation are available on the company's which day.
I would now like to turn the conference call over to Greenberg CEO, Jim Brickman. Please go ahead Sir.
Thank you hi, everyone with me is Rick Costello, our CFO and Jed Dolson, our CLO. Thank you for joining the call.
As the operator mentioned if you are joining us by phone today. The presentation that accompanies this earnings call can be found on our webpage at green brick partners Dot com at.
At the top of our webpage click on investors and the governance.
Click on the option that says reported and scroll down the page until you see the second quarter Investor call presentation.
I'll give everybody a few seconds to do this.
With our all time record results achieved this quarter Green brick annualized Q2, 2021 return on equity hit a new high of 32%.
Thanks to our great team effort, we provided our investors some of the best returns in the industry.
Even better we expect these returns to accelerate.
Our total revenues were $1.1 billion on a trailing 12 month basis from Q1 to Q2, we increased homebuilding revenues by 54% and our EPS doubled.
We continue to be confident that of revenues and earnings will continue to grow sequentially each quarter. This year.
Our core focus on land development, and our dominant president and reputation of our markets has resulted in the 133% increase in our of lots owned and controlled from the prior year.
Our superior capacity to source, new land has allowed us to grow our units under construction, an astounding, 95% as compared to June 30 of 2020 and provides a ready supply of new housing to meet demand.
Our gross margin reached 26, 8%. This quarter. This is up 360 basis points from the prior year and up 140 basis points from the first quarter as Green brick has achieved pricing power in the current markets of Dallas Fort worth and Atlanta.
In order to capitalize on the rising prices and demand we have paid sales by limiting our available homes for sale to generally those with at least the slab Foundation board.
We have also achieved price increases in excess of rising input costs.
We believe this focus on price over pace will sustain our industry, leading margins and strong financial performance through the remainder of 2021.
In additional to our prepared remarks on the call. We will plan to provide more detailed insights into our growth strategy capital planning and operational initiatives driving the record results this quarter.
This event will also provide a unique opportunity of fielded questions for our division presidents and purchasing teams the Investor day webcast for stream for 19 of M to 12 P. M Central day lifetime, and we encourage all of our intended on today's call to register for this event through the Investor Day 2021 of the option.
For the investors and governance SEC.
Section and.
Of our webpage.
Please flip to slide 4 of our presentation. We are of diversified builder with 8 brands for major markets with a wide array of product types and price price ranges. We believe the stratification of products will continue to appeal to a broad base of homebuyers and expect that our entry level level segment will continue.
To rapidly expand through the growth of our trophy signature and CB journey brands.
As we have discussed in previous calls green brick operates under a much simpler on restricted ownership structure of than seen in prior years as approximately 70% of our top line revenues are now generated by wholly owned builders and another 10% of our total revenues are generated by subsidiaries with a <unk>.
The 20% minority interest.
The markets, where green brick operates benefiting from significant economic and demographic trends, which we will explore in detail in the next 2 slides.
Slide 5 quantifies the strong population growth over the past decade seen in Texas, Colorado, Florida, and Georgia proved the 2020 census data.
Out of the 25 largest states in United States. These for states showed some of the highest percentage increases from their populations versus 10 years ago text.
Texas led the nation with its resident population expanding just under 4 million people. This decade, Colorado, Florida, and Georgia, All show double digit growth over the same period, while the population for the U S grew only 7.3%.
Yeah.
We believe this positive population growth is evidenced that our concentration in the sunbelt in the sunbelt adjacent states is a winning strategy we.
We expect the in migration to the state from California, and the northeastern United States and the strong demographic profiles of the Sunbelt, we will continue to generate positive population growth for many more years, and we will preserve robust housing demand and our future years.
On slide 6 we highlight the economic strength of our core markets and present the decline in active home listing scene in June 2021 from the prior year.
Like every other economy in the country. The COVID-19 pandemic create a major disruption of commercial activity and led to a significant rise in unemployment early last year.
However, as shown on the right side of the graph on this page Atlanta, and Dallas Fort worth of remained remarkably resilient.
The Atlanta, and Dallas Fort worth of achieving the lowest and third lowest unemployment rates in May 2021.
It is evident that our core markets continue to sustain a long a strong job market and labor force.
We believe these economic strength will continue to support the strong demographic trends in our markets and reinforce housing demand for years to come.
Looking at the left side of the graph you can see the Dallas Fort Worth Atlanta had the largest 12 month decline in the active listings as of June 32021 of the 10 largest msas with listings down 59% and 53% respectively.
This remarkable drop in the listings evidenced the booming housing demand in our markets and is an indicator of the pricing power Green brick has in 2021, the capitalized inventory shortages of the existing homes.
We expect this imbalance between the housing demand and supply in our markets to persist through 2022, providing green brick with the continued pricing power to offset or even more than offset rising costs.
With 87% of our ending active communities in DFW in Atlanta, We believe the green brick is well positioned to succeed in 2021 and beyond.
Additionally, we believe that the strong bounce back from the high unemployment seen in April of 2020, and the rapid uptick in demand is further proof that our focus on business friendly pro growth markets is the correct and best choice that we will continue to differentiate us from peers.
Jed Dolson, our Chief operating officer, and Executive Vice President will now speak in greater detail to our growth drivers and land position Jed. Thanks, Jim on slide 7 we demonstrate how our investment in land has translated to an increased capacity to generate topline growth.
As you can see from the chart on the slide a key driver behind our strong financial and operational results has been our ability to convert investments in land to future growth in revenue during.
During the first half of 2021 our lots owned and controlled increased by 6883 to end of 'twenty 1351, total loss and a new all time high for the company.
This is of 48% increase from the start of the year.
After including land under option and lots of option through joint ventures, we expect nearly 88% of our current inventory of lots owned and controlled to be self developed by the company.
We believe the strong emphasis on land development share a lot of green brick is margins and returns to continue to represent 1 of the best growth opportunity profiles among our peers.
The self developed lots of avoid expensive premiums charged by third party land developers.
For those of you who are interested slide.
Slide 8 provides additional detail on the attractive sub markets of Dallas, and Dallas, Fort worth and Atlanta, where our lot supply is located.
Now follow me the slide 9 and you will see that our communities and lots under development the new all new highs this quarter with.
With 42 communities under development of our land pipeline is well established to meet our continued growth trajectory in the next several years.
These lots under development will shift towards the entry level market.
With over 1 third of the lots under development located in more of affordable Submarkets.
In the next 6 months, we expect to complete our release roughly 1800 lobster subsidiary of Homebuilders for new housing starts.
During the fiscal year 2022, we expect to accelerate our delivery of finished lots by finishing 4600 lots during the year.
With both our long term and short term line land needs met we're confident green brick should be able to continue growing through fiscal year 2023.
Slide 10 highlights our ending units under construction.
Our units under construction are up 40% over the past 6 months and 95%.
Over the past 12 months, while we have seen growth of virtually all of our brands and price points. Our unit growth was primarily driven by starts in our trophy.
Brand, which increased its ending units under construction by 315% during the 12 months ended June 30 of 2021.
As we go forward, we expect the continued expansion of the trophy brand to establish the larger communities with higher absorption rates and unit density.
Yeah.
Additionally.
Our pivot to these larger communities focused on entry level buyers has not been at the cost of increased risk for Q2.2021 home closing saw an average FICO score of 750 with 85 per cent of our fundings exceeding a FICO score of 700 per data for.
The green bricks mortgage ventures.
The credit worthiness of our average buyer profile is the fundamental strength of many of the markets, where we operate which we will which we believe we will continue to mitigate risk for our business.
In summary, we feel way of a very strong land position on some of the best markets in America with strong demand for low risk buyers, all while maintaining a conservative debt to capital ratio and achieving industry leading margins.
Next Rick Costello, our CFO will discuss our second quarter and annual results in more detail.
Thanks, Jed. Thank you everyone for joining us today to review, our 2021 second quarter financial results.
Before I talk about our record second quarter results I want to provide some additional context for the remarkable growth this quarter and take a more detailed look at how our trophy brand is well established for future growth Slide 11 of our presentation provides an in depth look at trophy share of Green bricks performance metrics through June 30th.
2021.
As you can see on the slide trophies percentage of home closings has grown by 14% from 20% of our full year closings in fiscal year, 2020% to 34% for the 6 months ended June 30 of 2021.
However, with 41% of our starts this year and 65% of our lots owned and controlled related to trophy. We believe trophy has a clear runway to continue its growth trajectory and Dallas Fort worth.
While all of the lots of owned and controlled allocated trophy has increased nearly 460% from a year ago. It's important to note that the the nearly 14000 lots shown as of June 30 of 2021 includes 2 communities with more than 1000 lots each that will have a much longer lifecycle. So ex.
<unk>. These 2 communities trophy share of existing lots of still 54%, which is 20% higher than trophy is 34% share of our home delivery for these past 6 months.
Slide 12 of our presentation explains why we believe the growth of our trophy signature brand has the capacity to scale, our bottom line results, even faster than our top line results.
First with the average trophy community expected to be double the size of our other subsidiaries next year in terms of lock count per community.
We're able to increase our absorption pace without requiring growth in community count.
Second trophies business model allows for 100% utilization of purchase orders during construction with no changes allowed.
This process reduces our average standard cycle time by roughly 12% and allows for more efficient inventory turnover and stronger financial returns.
And finally trophy has seen an outsized improvement in its gross margin over the last 12 months, increasing by 490 basis points.
This growth exceeds by a 130 basis points, our consolidated margin improvement of 360 basis points on the same year over year basis. So this higher profitability is enhanced by trophy slower SG&A leverage this combination of higher margins shorter cycle times and better SG&A leverage should gen.
<unk> higher returns on invested capital of.
All in all we believe these strong fundamentals will continue through 2022 and make a strong case of our continued investment in trophy signature homes.
Slide 13 of our presentation shows the continuation of our high levels of year over year of growth in our home closings and home closings revenues over the last 12 months basis, our closings grew 27% while the related revenues grew 26% year over year.
Quarter over quarter of our closings grew by 37% and our home closing revenues grew by a remarkable 47%.
And as Jim mentioned earlier, we believe this volume of closings represent a new normal for the company that green brick can continue to grow further in the remaining quarters of this year.
On slide 13 looks at our historical revenue slide 14, pivots to our future closings and shows the year over year increases in net new orders and our ending backlog.
While net new orders are up 50% on the last 12 months basis year over year. Our Q2.2021 net orders were just up 4% as the company successfully metered sales to better match construction schedules and buyer expectations and improve our ability to capture price volatility.
Despite significant price increases taken by the company net new homeowners or home of orders were 210% over double of home deliveries during Q1 of this year.
Consequently, we determined that price increases were not sufficient to limit demand for net new home orders.
As a result, we metered sales during the 3 months ended June 32021 by limiting sales per community to better align the absorption rate of sales with the ability to delivered new homes.
Like many of our peers, we limit sales almost universally to homes that at least have of slab port.
The absorption rate per average selling community per quarter of $6.8 homes. During the 3 months ended June 32021, and $9.1 homes year to date ex.
<unk> the 5.9 net new orders during both the 3 months and 6 months ended June 32019, that's 2 years ago by 15% and 54% respectively.
This slowdown of our record sales pace seen in the previous 3 quarters has allowed us to shift our mix of sold versus spec units under construction really under construction nearly 500 basis points over the last 3 months.
Something we haven't provided before but our mix of homes under construction is now at 33% spec homes at June 30 of 2021, which is up from only 28% as of March 31, 'twenty, 1, but still far below the 44% spec home level as of the beginning of the year.
Likewise, our Q2.2021, ending backlog is up 118% from a year ago prior but saw small 2% declined sequentially. Despite closing a record number of homes. During the quarter, we will continue to normalize our pace and our level of spec versus backlog homes under construction.
And our total backlog levels as well as we drive closing volumes higher each successive quarter of this year.
The bottom line.
We're holding back homes for sale. So we have a better mix of pre sold backlog homes versus specs, we think improving our mix will lead to higher margins and returns and less risk of construction costs prices are rising every month, so selling somehow says 2 or 3 months before completion will get us a better margin than selling all of the house of 7 months ahead.
The expected return to a higher level of spec units under construction should position us to capture increased sales prices managing this type of flow is of corporate strength and making decisions like this contribute to our superior gross margin and return on capital.
Now, let's move to slide 15 related to our financial highlights.
Adjusted gross margin for Q2, 'twenty, 1 was up 360 basis points over Q2 of 2020 and adjusted gross margin was up 320 basis points Q over Q.
Sequentially.
Gross margins were up 140 basis points from Q1.
For the 6 months ended June 32021, homebuilding gross margin and adjusted homebuilding gross margin, we're up 320 basis points and 270 basis points, respectively from the same prior year period.
Our robust year over year of growth in gross margin is expected to continue over the next 2 quarters as we see the benefits of strong pricing power in our ending backlog translate to future closings.
Turning to operating leverage our SG&A expense was down 190 basis points at 9.1% for Q2 of 'twenty, 1 with the prior year quarter at 11.0%.
Our year to date Q2 ratio of SG&A expense to total revenues of 10, 4% was down 140 basis points from 11, 8% for the prior year.
So with increasing top line revenue is expected through the remainder of this year, we expect quarterly and full year operating leverage to continue to improve.
Our interest coverage of 21.9 times for Q2, 'twenty, 1 represents a 53% growth over Q2.2020, while our year to date interest coverage for Q2, 'twenty 1 of $17.6 times was 56% higher than the prior same year period.
Our strong interest coverage clearly demonstrates our capacity to generate positive cash flow well above our needs.
Now the bottom line, our Q2.2021 diluted EPS of $1 and <unk> was a record for any quarter and represents a 55% increase over Q2 of 2020 and it is of doubling sequentially from 51 in Q1 of this year.
For the 6 months ended June 30th our diluted EPS of $1.53 was up 56% from the prior year period.
Now if you'll recall during Q2 of last year to Q2 of 2020, we benefited from of $6.7 million tax benefit from energy tax credits related to open prior tax years, so to get a better sense of our improvement in our operational income performance, we really need to look at pre tax income pretax income grew 9.
<unk>, 4% in Q2, 'twenty, 1 over the second quarter of 2020.
And our annualized net income return on average book of equity, which Jim referred to earlier grew an outstanding 610 basis points to reach 32% this quarter combined with our low debt debt leverage our risk adjusted returns are truly remarkable.
Please move to slide 16 of our presentation, where we compare our Q2 'twenty 1 gross margins with available peer data.
Our gross margin reported for the quarter was 26, 8% and 26, 3% year to date the.
This chart demonstrates that our performance is among the best in the industry.
We believe our superior margin experience is evidence of our conservative land underwriting operating efficiencies as we scale of business and prudent planning. This is a winning strategy that has well preparedness to manage pace and price during the remainder of 2021 and beyond we.
We expect gross margin to continue to rise sequentially. During 2021, as we continue to realize the strong price appreciation in our backlog through future closings.
Slide 17 visually demonstrates that we have grown our revenues and provided stable earnings by concentrating on several homebuyer segments.
For the 6 months ended June 32019, 2 years ago, 2 segments accounted for more than 60% of our revenues.
Fast forward 2 years, and we now address 6 distinct and significant customer segments, which all experienced strong revenue growth in the first 6 months of the year for the 6 months ended June 32021, our entry level segment, plus our first time move up segment now combined to represent 41% of home closings revenue.
<unk>, an increase of 2500 basis points over 2 years ago, when they combined to represent just 16% of home closings revenues.
Now this expansion of our more affordable inventory was created through the intentional reallocation of capital to our trophy signature homes brand. We expect to continue to expand our entry level segment and the remainder of 2021, which we believe should position green brick to capture an even greater portion of todays house.
The demand.
Please turn to slide 18.
Here, we have compared our performance versus our small and mid cap peers to demonstrate why we believe that our risk adjusted growth and returns are uniquely strong.
We've provided 6 measures 5 of the measures cover the 12 months ended June 32021, or the nearest period.
Growth in homebuilding revenues gross margin percentage interest coverage pretax income return on invested capital and growth and lots of them under control.
And the other measure which is debt to capital was as of a point in time June 32021.
With the strength of Green <unk> results for each of these metrics green brick continues to perform at or near the top of our peer group in fact, our high gross margins exceed EBIT some of the large cap peers as we discussed earlier.
Our returns on capital are even more impressive when you consider our peer leading growth of lot supply, which has included the investment of $180 million of land and lot of acquisitions during the second quarter of this year alone.
And with our expect our expected sequential growth in homebuilding revenues continuing for the balance of 2021, we expect income returns on capital to Additionally, elevate during the balance of the year.
Lastly on the financial slides. Please look at slide 19, which focuses on our lower leverage.
We were able to achieve a record setting results, while maintaining 1 of the lowest debt to capital ratios among small cap and mid cap builders again, reminding you while funding of $180 million of land and lots of acquisitions during the quarter.
I'll now turn the call back to Jim who will wrap up of our part of the call part of opening things up for Q&A chip.
Okay. Thanks, Rick.
Our record results. This quarter are the culmination of years of diligent planning and hard work by our subsidiary of builders and our corporate team.
We believe the outstanding results achieved this quarter are just the first step in green brick remarkable growth story as the company swiftly moves to materially exceed $1 billion in revenues this year.
We believe green brick prospects for continued topline and bottom line growth are truly unrivaled in our industry.
To better understand how green brick has achieved impressive risk adjusted returns to date, we invite each of you to join US tomorrow for our inaugural virtual Investor day from 9 a M to noon central day lifetime.
With our Q2, 'twenty, 1.2021 financial and operational results, reaching new highs. This quarter. We believe this event will provide critical insight into the new inflection point and the company's growth story and hope that each of you will be able to attend.
The registered please go to our website and click Investor day, 2021 under investors and governance.
I'll now turn the call back to the operator for questions.
Okay.
And at this time of we'll be conducting a question and answer session. If you'd like to ask the question. Please press star 1 on your telephone keypad income.
The recent tone will indicate your line is in the question queue, you may price starting to if he would like to remove your question from the queue for parts.
Using speaker equipment.
It may be necessary to pick up your handset before of Princeton the certainties.
1 moment, please while we pull for questions.
And our first question is from Michael Rehaut with JP Morgan. Please proceed with your question.
Hi, This is Maggie on for Mike Thanks for taking my questions.
Firstly I'd like the dig a little bit more into how youre thinking about sales for the remainder of this year and into next year.
After 3 quarters of.
The elevated starts level do you see this as more of a normalized starts pace going forward and also as you look at the back half of the year.
You've got the pit.
It towards the higher absorption drove the communities you've got kind of of the increased mix of spec homes under construction, but you've also got that competing with the the price increases.
Can you talk about how we should kind of balance all of those factors as we think about the next quarter or 2.
Yes.
This is Jim and jet and both Rick can chime in on this but.
We are having normalized starts and really it's a little bit more than normalized we're going to complete.
Growth starts.
Particularly in the trophy brand.
We are seeing still very strong demand I think.
Some investors don't understand how really strong net demand is and we have intentionally delayed selling homes. Because we know that demand is going to be there there really arent a lot of options for homebuyers.
We have 1 community in Atlanta for example debt.
It's not a big community and we had 1200 people show interest in like an 80 lot community that we haven't even considered really opening up for sales yet. So we have a lot of indicators like this the demand is very strong and thats why we have not taken orders, we could have probably resold that.
Total community, but there's no point in doing that.
Community that we took a long time to entitle and Theres no point and.
The pre selling product in an inflationary cost environment. When we can capture higher margins down the road, we have a lot of examples like that.
Got it also also Maggie just to continue on.
Is that a little bit.
With.
Ticked up from 28% of 33%.
The spec.
That's 5% of 500 basis point increase was very similar to what.
D. R. Horton did this quarter as well there are some builders, who have not started to meter of their sales and they're getting fewer and fewer spec homes out there as a percentage of of what they do.
Our model is not based on having such a large number of backlog homes, we leave money on the table, we can't tell our customers with certainty of when theyre going to be closing.
We're by selling earlier in the process, we're losing out on potential price increases so for.
For us we seek to get back to those levels, yes, we're going to be closing a lot of houses in the back half of this year.
But we still want our backlog of ASIC.
A portion of what we've got under construction to go downtown.
Okay. Thank you and second on pricing.
Could you give us an idea of how much you raised prices during the quarter and looking forward how much more runway you think you have to continue raising prices.
Look for you start to see some more pushback.
Also if you could.
Maybe give any update on kind of where you think asps for the year.
Might end up.
Jed why don't you take that since you manage this process sure.
We on a monthly basis, we've been raising prices.
The varying.
3% to 5% per community per month.
I think the 1 thing that we're very excited about is really not.
Price raising but.
Because we do want to still provide an affordable product to the consumer but we're very excited about what lumber is doing and how the cost input side of our businesses dramatically falling.
You know in some cases, we've seen the lumber packs.
For $20000 in the past 2 months.
So we think theres still some room for that to fall we are excited about the and.
That should lead to increased margins going forward.
Got it and 1 more if I could sneak it in there I think you mentioned the trophies gross margins improved.
<unk> the company average for the quarter, but.
On an absolute basis.
Alright trophies margins versus the rest of the company.
Maggie we don't by brand or by geography disclose gross margins. We came about the most information on so many areas in this call that we typically don't touch as you know we don't give guidance. We came about as close as we can to giving guidance telling that we expect the rest of the year to be better.
Hopefully the market will start paying attention to that but we don't give gross margins by brand or geography.
Okay. Thank you.
Yes.
And our next question is from Alex Rygiel with B Riley. Please proceed with your question.
Thank you and very nice quarter, gentlemen, circling back to 1 of the earlier questions talking about building materials costs understanding the lumber has come down.
When might we see sort of the peak of lumber ex.
Vince.
Go through your P&L. So therefore window when we on the sort of the back side of the curve is that right now or is that a little bit later in the third quarter and then how should we think about building material costs for all other products going into the house.
Okay, I'm going to take part of that question I would like to of jet chime in later.
We were able.
Well I think reacting very quickly in the being in really strong markets and strong neighborhoods within our markets.
The lumber costs that went up we are able to more than pass on I've read a number of other conference calls where people are concerned about.
The lagging effect of those lumber costs, and how theyre going to affect third and fourth quarter margins. We don't see margin degradation of the third and fourth quarter, because we were able to raise prices very quickly.
And so we are not seeing that in the third and fourth quarter. This year.
In terms of building material costs, I really hope debt.
Everyone on this call can attend our Investor day, Jack Wilkes is in town. He is our national purchasing director all of our purchasing agents are going to be at the Investor day.
Youre going to get really of very granular look and what we expect to see in purchasing and how we're operating our business, but in a nutshell, it's still a minefield out there in terms of bottlenecks and supply constraints, but we think that we've managed this process really well on tomorrow on the <unk>.
For day, you can meet the people that are doing that.
That's great and then turning over to land sales, obviously, it ticked up in the quarter.
Talk a little bit about your intermediate and longer term land sales of strategy.
Sure and jet I want debt for sure want you to chime in on this but it was a little bit of an odd month. This year, we had 1 large transaction.
And.
That we sold a retail site and a multifamily site to our multifamily institutional developed but we've done a lot of business with and.
<unk>.
We were how many lots of do we really left with 250.250 lots. After the sales we made a nice gain on that we've done business with these people.
And.
What we need to communicate to investors is that these 250 lost that we're still left with despite taking a nice land profit our basis in these lots on today's values. These homes to produce higher margins than our companies producing already.
So we really don't plan on selling any more lots, we may come into the situation where we.
We have a unique opportunity to coordinate a large parcel of global sell off the retail or of multifamily uses because we don't do that but we really don't plan on selling them any more lives judge of me.
No additional comments.
That's very helpful. Thank you.
And again as a reminder, if you have any questions you May press star 1 on your telephone.
So the majority of who joined the queue.
The next question is from Bill the zone with Titan Capital Management. Please proceed with your question.
Great. Thank you congratulations on the on an amazing quarter.
I'm going to ask a couple of questions from a point of ignorance here if.
If you will allow can you first of all talk about the 600 for new haul motor orders in the second quarter are.
Being down from the 1082, new home orders in the in the first quarter.
You've talked about limiting the.
Sales, but that's really quite a dramatic of.
The dramatic falloff.
Falloff.
Yeah. It is the fall off of it was an intentional fall off and I think our investors can be very pleased at the end of the year when they see the results of that strategy because as we said, we're seeing great demand and it doesn't make sense to sell 1000, let's.
Let's say, we could have sold 11 hundreds of I'd say that it doesn't make sense in a rising price environment to sell of 1100 homes. When we can when we see demands Naomi harvest 3 of 4% greater margin by delaying net sales process.
Bill in the first quarter, we sold of 1082 houses and closed 516, that's more than double and that's just really all of it does add to our backlog.
On deals that are further out in the delivery, where if we wait until later in the construction process, which is our typical in our business is not to be of backlog builder, but if we wait until later in the process, we would've gotten even more price increases are passed along to our customers. So it is going to lead to better margins.
It's going to lead to better control of our of our construction and the.
The ability to.
Give our customers.
Better visibility on the dates are isolated to kind of close and on the homes. We started it should.
A relatively improved cycle times, because we're not dealing with the customer during the during a lot of this process.
That's helpful. So essentially this is the data point that our debt that highlights.
Is that what you've been talking about on the call not only are you doing but youre doing in it and the dramatic way.
Yes.
Okay. Thank you 1 more question again this is from a from a point of ignorance.
Do you.
I see you anticipate or accomplish having revenues and earnings.
Growing sequentially.
When the backlog the backlog of units and the starts are down.
Versus the first.
Well, we had a very strong starts FERC Q3 of last year Q for Q1.
Any any review of really have not seen that level of closings.
Including the base 757 deliveries I mean, we were over 1000 starts per quarter for 3.3 quarters in a row.
We have the most homes build under construction I think we've ever had by a considerable margin I think that's 1 of the things that investors are not.
Really fully comprehend Inc.
And 1 of the things that we have noticed it or identified is that the trailing 4 quarters start is at a record high of as.
Is it are the undercut and units as you point out so should we be paying more attention to the trailing 4 quarters.
Starch than just any 1 individual.
I think so and that and what you have to put in context of the trailing 4 quarters. As we said it was intentional many of those starts we didn't want to sell.
We would have to sell the house at current prices today, and we think we can pick up margin, what's not of drip of lot of risk because of the demand has remained so strong.
And selling these homes.
The 2 months before the completed rather than trying to get a presale.
And the actually and we're still trying to start more and more spec homes, but because of the supply data we just can't.
Great. Thank you congratulations again on the great quarter and for helping us understand how you're how you're managing the pieces of the puzzle well then thank you for the <unk> Bill.
And we have reached the end of the question and answer session I will now turn the call over to management for closing remarks.
Alright, thank everybody for.
For joining the call today and again reminder, please go to our website.
And on our Investor page and sign up for Tomorrow's Investor Day, and I think you will find a lot of useful information. Thank you.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
[music].
Sure.
[music], Inc.