Q3 2021 MDC Holdings Inc Earnings Call
[music].
Hello, and welcome to the M. D. C Holdings 20 told you one third quarter conference call.
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Note today's event is being recorded I now would like to turn the conference over to Derek Kimberly Vice President Corporate controller. Please go ahead, Mr can rally.
Yes.
Thank you good morning, ladies and gentlemen, and welcome to the MDC Holdings' 2021 third quarter earnings Conference call.
On the call with me today I have Larry Mizel Executive Chairman, David <unk>, <unk>, Chief Executive Officer, and Bob Martin Chief Financial Officer.
At this time all participants are in a listen only mode. After finishing our prepared remarks, we will conduct a question and answer session at which time, we request that participants limit themselves to one question and one follow up question.
Please note that this conference is being recorded and will be available for replay.
For information on how to access the replay please visit our website at MDC Holdings Dot com.
Before turning the call over to Larry and David It should be noted that certain statements made during this conference call, including those related to Mdc's business financial condition results of operation cash flows strategies and prospects and responses to questions may contain forward looking statements within the meaning of the private securities litigation.
And reform Act of 1095.
These statements involve known and unknown risks.
Uncertainties and other factors that may cause the company's actual results performance or achievements to be materially different from the results performance or achievements expressed or implied by the forward looking statements.
These and other factors that could impact the company's actual performance are set forth in the company's third quarter 2021 Form 10-Q, which is expected to be filed with the SEC today.
It should also be noted that SEC regulation G requires that certain information accompany the use of non-GAAP financial measures.
Any information required by regulation G is posted on our website with our webcast slides.
Now I will turn the call over to Mr. Michael for his opening remarks.
Good morning, and thank you for joining us today as we go over our results for the third quarter of 2021 and provide an update on the outlook for company.
N D C generated net income of 146 million or $1 99 per diluted share in the third quarter 2021.
Driven by a combination of strong revenue growth.
Can you price increases and improving overhead leverage.
Home sales revenues grew 26% year over year, thanks to a 13% increase in deliveries and a 12% rise in average selling prices our home sales gross margin of 23.5.
It represented a 300 basis points improvement over the prior year period, as our new home pricing stay they head of cost inflation.
We also made further improvements to our fixed cost leverage as our SG&A expense fell 80 basis points year over year to 9.6%. We are extremely pleased with our financial results this quarter, particularly in light of.
The supply chain issues that continued to affect our industry.
Order activity remained healthy during the quarter, it's 4.1 sales per community per month.
This represents the second highest third quarter order pace for the company in the last 15 years buyers continue to be drawn to our more affordable priced new home offerings, which allow for personalization to our build to order strategy.
We believe this operating model is a more prudent and capital efficient way to run the business and leads to better risk adjusted returns over time.
We also believe that results in fewer cancellations as homebuyers naturally become more invested in their purchase when they played an active role in designing and furnishing their home.
This is an important differentiator for our company, particularly in light of the lengthening cyclical times.
From a capital standpoint M. D. C continues to be in great financial shape.
We ended the quarter with a debt to capital ratio of 39.7% and a net debt to capital ratio of 23.7%.
During the quarter, we issued 350 million of senior notes due in 'twenty 61.
And an interest rate of three point 96, six and made a tender offer for over $120 million, if our senior notes due 2024, which carry an interest rate of 5.5%.
While the early retirement of debt resulted in a 12.2 million charge. This quarter, we now have a lower cost of capital and the debt maturity schedule that extends out 40 years.
Our total liquidity position at the end of the quarter stood at just over 2 billion, giving us plenty of capital to scale our operations in the coming years. It will also allow us to continue paying our industry, leading dividend, which currently stands at $2.
<unk> per share on an annualized basis.
I will now turn the call over to our President and Chief Executive Officer, David Bandage.
For more insight into our homebuilding operations David.
Thanks, Larry and good morning to everybody on the call as Larry mentioned, we continued to see robust demand for our homes across our geographic footprint with the west region, posting the best order pace during the quarter at $4 nine homes per community per month, followed by the east.
At three seven and our mountain region at three point O <unk>.
Pricing remained firm within our communities and we did not witness any widespread use of incentives or discounting in our markets as each of the segments posted home sales gross margins in excess of 20%.
As our existing operations continue to thrive we have started to move into new markets that exhibit similar strong housing fundamentals.
Earlier this year, we announced our expansion than Boise in Nashville, and in this quarter. We are pleased to announce our entry into Austin, Texas in Albuquerque, New Mexico.
Similar to Boise and Nashville, We believe these two markets should show positive growth directory for new construction, thanks to a steady influx of jobs.
Favorable affordability and an excellent quality of life.
We have land deals in place in both markets and look forward to establishing profitable operations in the years to come.
As we head into the end of the year M. D. C is focused on delivering homes and backlog while setting the stage for additional growth in 2022 or.
Our lots owned and controlled at the end of the third quarter increased by 37% year over year, giving us a great opportunity to capitalize on the positive housing fundamentals in our markets.
We have several new communities scheduled to open in the coming quarters.
Which Bob will give more detail in a moment with that I'd like to turn the call back over to Larry for a few additional comments.
Thanks, David M. D C delivered another quarter of strong profitability in the third quarter and remains poised to continue that trend.
Two favorable industry dynamics are excellent market positioning and our sizeable backlog of homes.
While we expect the current supply chain issues to persist for the foreseeable future. We also expect the current demand drivers to remain in place as well.
Giving us a great opportunity to finish the year on a high note.
Building on our success in 2022.
As a result, we are optimistic about the future of our company.
Now like to turn the call over to Bob for more detail on our results this quarter and an update about the company's outlook.
Thanks, Larry and good morning, everyone.
During the third quarter, we generated net income of $146 million or $1.99 per diluted share.
Representing a 48% increase from the third quarter of 2020.
Home sale revenues grew 26% year over year to $1.26 billion, while gross margin from home sales improved by 300 basis points the.
The growth in home sale revenues and margin expansion resulted in a 62% increase in pretax income from our homebuilding operations to $165 $2 million.
As Larry mentioned, we accelerated the retirement of $123 $6 million of our unsecured notes due in January 2024 through a cash tender offer during the quarter.
The retirement resulted in a loss of $12 $2 million, which is included and homebuilding pre tax income.
Financial services pretax income increased 13% year over year to $27 $5 million all of our financial services companies benefited from the increased volume of our homebuilding operations during the quarter.
Our mortgage company also benefited from a $3 $5 million gain recognized on the sale of conventional mortgage servicing rights during the period.
This increase was mostly offset by increased competition in the primary mortgage market.
Increased compensation related costs and a temporary decrease in our capture rate.
Our tax rate increased from 21, 5% to 24, 3% for the 2021 third quarter the.
The increase in rate was primarily due to a decrease in tax windfalls recognized upon the vesting and exercise of equity awards, which was partially offset by a year over year increase in home energy tax credits for the remainder of the year. We currently estimate an effective tax rate of approximately 24 five.
Percent, excluding any discrete items and not accounting for any potential changes in tax rates or policy.
Homes delivered increased 13% year over year to 2000 and 419 during the third quarter driven by an increase in the number of homes, we had in backlog to start the quarter.
Our ability to convert backlog into closings continues to be negatively impacted by increasing permitting times and labor and material shortages.
As a result, we saw cycle times increased by approximately two weeks sequentially from the second to third quarter of 2021.
The number of homes delivered during the quarter was below our previously estimated range of 2500 2700 units and was a direct result of the extended cycle times that we experienced.
The average selling price of homes delivered during the quarter increased 12% to about $520000.
The increase was the result of price increases implemented across the majority of our communities over the past 12 months.
For the fourth quarter, we are anticipating home deliveries to reach between 2000 703000 units with an average selling price between $530000 and $540000.
Gross margin from home sales improved by 300 basis points year over year to 23, 5%.
We experienced improved gross margin from home sales across each of our segments with our west segment, showing the largest increase year over year as well as having the highest absolute.
Level overall these.
These improvements were driven by price increases implemented across nearly all of our communities over the past year, which has been partially offset by increased building material and labor costs.
While we've seen lumber prices decrease in recent months, we continue to experience cost pressures on other building materials and labor costs.
Gross margin from home sales for the 2021 fourth quarter is expected to increase to between 23, 5% and 24% assuming no impairments or warranty adjustments.
Our total dollar SG&A expense for the 2021 third quarter increased by $16 $5 million from the 2023rd quarter, driven primarily by increased general and administrative expenses.
Our SG&A expense as a percentage of home sale revenues decreased 80 basis points year over year to nine 6%.
General and administrative expenses totaled $59 $9 million during the third quarter due to increases in compensation related expenses, including increased bonus and stock based compensation accruals.
We currently estimate that our general and administrative expenses will grow to between $65 million and $70 million for the fourth quarter of 2021.
Marketing expenses increased $900000 as a result of increased master marketing fees relating to increased closings volume, however, marketing expenses as a percentage of home sale revenues were down 50 basis points year over year as we were able to continue limiting advertising expenses in this high demand environment.
Our commissions expense as a percentage of home sale revenues decreased 60 basis points year over year as we have taken steps to control these costs.
During this period of strong demand for new housing.
The dollar value of our net orders decreased 21% year over year to $1 $31 billion due to a 32% decrease in unit net orders.
This decrease was driven by a 33% year over year reduction in our monthly sales absorption pace.
Our sales absorption pace for the third quarter of 2021 was a healthy four one orders per community per month. While this represented a year over year decrease from the third quarter of 2020. It was a 14% increase from the pre pandemic levels experienced in the third quarter of 2019.
The year over year decrease in our sales absorption pace was due to the return of more normal seasonal patterns as.
As well as our efforts to moderate sales activity as we have mentioned on prior calls overall, we believe demand levels remained highly favorable during the third quarter. We're also pleased with the start of the fourth quarter from a demand standpoint based on the net orders we've seen to this point in October.
The average selling price of our net orders increased 16% year over year as we have raised prices across most of our communities over the past 12 months.
While price increases slowed during the third quarter pricing remained firm and continues to more than offset the higher input costs related to building materials and labor.
Looking at backlog metrics on slide 11, the dollar value of homes in backlog increased 38% year over year. Despite the decrease in third quarter activity.
Well cycle times remain the biggest challenge to our backlog conversion efforts. We believe we are well positioned entering the fourth quarter with construction started on 84% of our backlog and 42% at frame stage of construction or beyond.
We approved 5892 lots for acquisition during the quarter, representing 54% increase year over year.
This brings the total number of lots approved for acquisition during the year to 15978 lots and marks the third time in the last four quarters, our approval activity exceeded 5000 lots.
We closed on 3214 lots during the third quarter.
Which included about 100 finished lots within our first subdivision in Austin, Texas.
Total land acquisition and development spend for the quarter was $420 million.
As a result of our land acquisition and approval activity. Our total lot supply to end the quarter was nearly 37000 lots representing a 37% increase from the prior year quarter.
In addition, 34% of our lot supply was controlled via option as of period end.
We believe that this lot supply combined with our continued lot approval in acquisition activity provides us with a solid platform for growth in 2022 and beyond.
Our active subdivision count was at two years or three to end the quarter up 5% from 194, a year ago. We saw an increased number of active subdivisions in both the east and west segments with each segment experiencing the largest increase access.
Active subdivisions in the mountain segment were down 8% year over year.
We're actively selling out of our first Boise subdivision as of quarter end and with the acquisition of finished lots in Austin during the third quarter, we expect to be opened for sales in this new market by the end of the year.
New community openings remained challenging in the current environment due to delays and municipal approvals and the strain on the available resources to complete development work.
So we have a number of legacy communities on the verge of closing out as you can see from the number of soon to be inactive communities.
As of September 32021.
This indicates that our active subdivision count.
Could decrease over the next few months as we work to open and begin selling out of our new communities.
Due to this potential short term volatility interactive subdivision count we're not reiterating any year end guidance for this metric. However, we do expect to see an increase from our 203 active communities at the end of the third quarter before we reached the end of the 2022 first quarter in time for the spring selling season.
While we expect further active subdivision growth from that point through the end of 2022, we will rate to provide further guidance until we have more visibility as to the timing of these community openings.
In summary, we are pleased with our financial results for the third quarter and believe the housing backdrop remains favorable.
While we expect the current supply chain issues to continue in the near term our current backlog and land position have us poised for continued growth into 2022.
Our financial position remains strong with over $2 billion of total liquidity and net debt to capital ratio of 23, 7% as of quarter end, providing us with the ability to continue to grow our business and invest in our new markets.
On behalf of the company I would like to thank all of our employees and subcontractors for their hard work and tireless efforts as we continue to work together to mitigate the supply chain issues impacting our industry.
Without their efforts, we would not be in the position. We are today poised to deliver more than 10000, new homes to our homebuyers for the 2021 full year.
With that I will now turn the call back to the operator for our question and answer session.
Yes. Thank you at this time, we will begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
Mary Jane Speakerphone, please pick up your handset before pressing the keys to try your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Stephen Kim with Evercore ISI.
Yes, thanks, very much guys congratulations on a strong quarter.
A couple of questions for you. One is I was curious if you could give us a sense for whether you're seeing a little difference in the profitability I'm thinking primarily gross margin.
Between.
Homes that you are selling on a dirt sale basis, which is at your core model and.
Yeah.
Homes that you are selling after they've canceled or in some form of construction.
Construction.
Already underway I know that's not your core business, but I also know that there are some of those sales that you make and curious whether those spec margins are higher than your dirt margins at this point.
I guess going through.
Closings.
Certainly the spec margins.
Our higher at this point kind of benefiting from kind.
Kind of current pricing.
As for the dirt.
Units are there a little bit lower but will probably come up over time as the price increases start coming through.
The closing levels.
Got it.
Bob you got a rough range of how much more margin.
With the spec units right now and were talking you know couple of hundred basis points kind of thing.
Right now, it's probably call it 5% 600 basis points, Yeah got it that makes sense.
Okay, and then second question relates to the issue.
I shall have affordability you know what we've been hearing from folks is that bill just wanted to be very judicious about pushing prices. They are cognizant that there is a psychological aspect of home buying and that particularly with the entry level or first time buyer they want to make sure that they're not.
Sort of crossing any any lines psychological lines that may trigger a buyer's strike or that kind of thing.
At the same time, we're hearing that whenever there is product available to be sold it sells very quickly and that buyers seem to be having plenty of opportunity plenty of ability to come up with extra cash if they need to all of which suggests that there is still plenty of room I had for price increases and that actual affordability.
It is absolutely fine right now I was wondering if you actually agree with that characterization or if theres any color you can provide around.
The effort and the interest in sort of.
Keeping your product quote unquote affordable is it actual affordability or or in affordability that you're bumping up against or not.
Steve This is David.
I think we got a couple of positive things happening with this a we're doing a lot more affordable product, which you know you've seen the seasons and then two we've got some new products coming out.
Even though a little smaller and more affordable the third leg of the school is really interest rates interest rates are still pretty darn affordable so.
When you look at.
Downpayments and house payments.
We're in a pretty good place Steve.
No doubt.
And I would add onto that.
Steve just with a couple of the metrics for Q3.
At four one.
The absorption rate standpoint, that's the second highest in our history and that's after having increased.
Prices.
Probably close to 25% to 30% over the preceding 12 months so.
That is something that we're very pleased with considering that that level of price increases and I guess the final thing is at the end of.
The quarter, we only had 21 finished.
Specs out there.
Which is down even from last year. So clearly it's hard to keep any finished inventory around its going pretty quickly.
Yes.
Great. Thanks, very much guys.
Thank you and the next question comes from Michael Rehaut with JP Morgan.
Hi, This is Maggie on for Mike.
First question I noticed.
During the quarter, there was a pretty large sequential step down.
In the number of homes that you started to around 2400 homes.
And I was wondering.
As you look to 2022 can you talk about the timeline and your level of confidence in ramping that.
Starts pace back up.
Yes, I think we feel pretty comfortable with that.
Starts part of things I think 24, 100 really just marries up with the number of houses we sold during the period, which also happened to be about 2400.
In prior periods, we were well in excess of 3000 units started so I think we do have the ability to ramp up.
Fairly.
Significantly from.
What we did in Q3.
Got it.
And second you mentioned.
You're seeing some cost pressures from.
Other building materials, besides lumber and some increases in construction costs I was wondering as you look at your cost basket can you.
Quantify any of those cost increases maybe year to date up from last quarter.
And how are you thinking about that inflation and kind of those.
Those increased costs relative to lumber still being below peak levels as you think about 2022.
Well I guess gone through closings.
We're probably up somewhere between 13 and $15 a foot.
For costs.
Direct costs going through the P&L.
That's versus.
At 25 Bucks a foot on prices.
Haven't gone up per foot year over year.
<unk>.
And I guess as we look towards.
<unk>.
Next year, as we see lumber and other things come through Yo Lumbers, probably peaking out in our P&L sometime in <unk>.
Call. It Q4 and in early Q1, and then should start to see some improvement going through our P&L from there the rest of the costs.
It's tough to say I think we're still battling through trying to make sure. We're getting the house disclosed so don't want to put any predictions out there on that one.
Got it that's helpful. Thank you.
Thank you and the next question comes from Truman Patterson with Wolfe Research.
Hey, good afternoon, everyone. Thanks for taking my questions.
First wanted to start off Bob when you were talking about community count growth in 2022, I didn't catch it in the prepared remarks.
Did you actually quantify that and what im hoping to think through for the communities that are coming online.
Alright.
This land.
Bought more recently in 'twenty one.
If so is there any way to quantify this or is this earlier vintage land that's a bit more self developed if you will.
That's a lot in one question, but I'll do so.
As far as the.
The community Count goes.
Essentially we had said we thought we'd be up 10% year over year.
We actually did.
<unk> seen increase year over year as at the end of Q3, but there is there is a little bit of volatility there so that 10% increase year over year, we may have to wait.
A couple of months after the year end to see that come through.
Essentially is what we're saying so we might not be up 10% year over year right at 12 31 two.
<unk> 2021, but we still think we're going to be up from where we were at at the end of the third quarter by the time, we get to the spring selling season, which is really the most.
Important part of things.
In terms of the vintages.
Of the land I think it's a mix we've been able to get some finished lots.
On board so those would be lost that we approved in 2021, but.
I think we've also got some coming through on a development basis that would have been.
Approved in.
2020, or maybe even a little bit earlier since development is taking a longer period of time.
Nowadays so.
I guess, it's a little bit of both on that front.
Okay. Okay. Thanks for that and then.
Second question.
Should we think about some of the startup costs.
Recent market.
<unk> is continued geographic expansion part of your strategy going forward or are you pretty comfortable with your footprint now.
Yes, yes.
Determined this is David.
We're very comfortable with their with their footprint today, but we really saw these four new markets that we're going into very similar in nature to the ones. We're in.
We think our products are going to be great. We've been able to get a decent land supply to start.
In our startup costs are fairly minimal.
We've done the startups in the last couple of years.
Ended up being very successful we expanded in Riverside County.
Three years ago now, we're one of the leading builders in Riverside County.
We just think it's very natural for us to do organic growth versus going out and trying to buy another homebuilder.
Alright. Thank you all for your time.
Thank you. Thank you.
Thank you and the next question comes from Deepa Raghavan with Wells Fargo.
Hi, Good morning, everyone. Thanks for taking my question.
One for you Bob and one for Covid.
Hum.
Bob can you talk about allocation trends across the community and the second highest absorption pace is somewhat in contrast to that.
Are you even on allocation.
What percent of the communities are on allocation and any time when you can be meaningfully off of that.
Yes, I think we're not really.
Operating under under allocation, we've been fairly consistent about this not not doing that versus trying to manage through price increases and then.
To the extent that we do allocate it would only be because we don't think we can start the the homes.
Within call. It. The next 60 to 90 days. So if we end up in that situation.
Then we would be likely to maybe hold back on some lots, but I would say for the most part.
We're not doing that.
Allocation across the country.
Okay.
Is poor than a normalized number for us too.
We expect more normal.
Is that a comfortable with even on some lower community count or is that going to probably change a bit.
On the momentum side of it.
I mean for US is a pretty darn good third quarter. Its second highest in the last 15 years.
Only eclipsed by last year, which was.
We have the charts at six one so even if you saw it a little bit lower than that I think it's still would be a really good.
Third quarter or fourth quarter I think.
Longer term being in somewhere in the four to five range on an annualized basis.
More where we seek to be.
So.
That's.
Kind of where we stand on that part.
Okay.
Last one.
More of a bigger picture.
So can you talk to how your recent foray into your Boise and other markets have progressed, so far any surprises positive or negative given that <unk>.
Opening.
Communities in a pretty challenging time environment.
And also can you talk to what are the newer upcoming market youll, probably excited to enter them. Thanks and that's it for me.
Yes. This is Dave, but I think I can answer it this way I think we're enthusiastic.
That all the new markets that we've started and that we've actually been able to get our land supply.
We know we got the right product for the market. So in the four markets, we're starting and we feel pretty good about the developers have embraced our product and our build to order strategy. So we're feeling pretty darn good about starting in those new markets.
Thanks, so much for both of them.
Okay. Thank you and next question comes from Alan Ratner with Zelman <unk> Associates.
Hey, good afternoon, thanks for taking my questions.
First question, Bob just on the corporate G&A guidance, that's a bit of a step up from where you've been running at previously and I know David you just mentioned the startup costs with the new markets is not overly material. So just curious what's driving that and if the startup markets have any impact there and if not is that 65 to 70.
<unk> the new run rate, we should think about going forward.
Yes, it's a good question I would say the bulk of it is compensation related costs. So it's not so much the new markets, but we just see compensation related costs going up.
Across the board.
Because of the competitiveness of the.
The job market.
<unk> got a couple of things coming through there.
The.
PSU units tend to be somewhat volatile and when we recognize that expense and part of it is anticipation that we might reach some hurdles set forth and those those PSU units.
So that can be a little volatile.
Other than that I think we're probably in that <unk>.
<unk> five plus range going forward here.
That's helpful. Thank you.
Second question I forgot who it was.
David or Larry I made this comment early on so I apologize for not remembering.
Referring to your cancellation rate and the.
Idea that the Delta order model kind of invest the buyers into the home and kind of keeps them in backlog and I certainly would agree with that but on the other hand Youre current camry is still running well below kind of where you historically run at and I would argue that that's a function of the strong price appreciation at those buyers have seen since Dave.
Written a contract.
With your comments that pricing has kind of normalized a little bit here are you at all concerned about cancellation starting to creep back up to those more normal levels. If the buyers don't have that embedded equity like like they do today, especially with cycle times, extending and buyers having to wait as long as they do today for their home.
Yeah David.
I look at it a couple of different ways number one.
Our consumers are invested in their house with their colors there personalization.
But the other thing we're in a really healthy market. So it's.
It's not.
A lot of demand and lower supply so people get and I think they're happy to have their house on their lots. So we feel very good about our business model.
Got it I appreciate that Dave Thanks, a lot.
Thank you and the next question comes from Alex Barron with housing Research Center.
Yes, thanks, guys and good job on the quarter.
I wanted to ask.
See you guys.
Right.
The dividend, which was good to see but wondering if you could share your thoughts around potential share buybacks.
Yeah.
Well I mean, it is something we have in our Arsenal we have a.
Authorization outstanding.
As we speak that said we haven't.
<unk> done that in about 20 years.
So clearly our preference has been.
To reward shareholders through the dividend.
And increases in the dividend as you've seen.
This this quarter.
But we haven't taken share buy backs off the table.
And how big is the outstanding authorization Bob.
Two 4 million shares.
Yeah.
Got it.
Okay.
One last thing on the supply chain issues. What would you say are the top two or three things that are the most pricing at this point.
This is David.
It's a mix bag its different from market to market. So I can't really tell you that.
One category or the other but we're seeing what I would call.
Spotty supply chain.
Each one of our markets.
So overall I don't think its just one thing.
Okay. Thanks, so much.
Thank you and once again as a reminder, please press star then one if you'd like to ask a question.
And the next question comes from Jay Mccanless with Wedbush Securities.
Hey, good afternoon, what was the cancellation rate in the quarter and what was it last year.
I guess so.
About 7% relative to beginning backlog.
On a year ago, I think it was about 12%.
And then.
If you're looking for relative to growth I think we're about 19% during the quarter.
Year ago, I think it was 14 or 15.
And what was that increase in the gross focused on any certain area of the country or any color you can give us behind that.
Well I think.
We had a much higher absorption rate.
Last year, and that's why we'd like to.
To refer to our relative to our beginning backlog.
Absolutely a number of cancellations was actually low.
<unk>.
Year over year.
On that.
That's really what's what's important to me considering they have much bigger backlog.
So Larry and David what finally pulled you over the fence on Texas I thought that was a market. Historically you guys didn't want to operate.
Well I'm going to give you a good answer because I think both Larry and I would and I.
Watch Larry laughing because.
We're actually going to Austin, Texas.
And so we're getting started there we think that market has got.
A lot of demand for our kind of product and so right now we've just made the decision to go to Austin.
And we think it fits into our business model, Larry you went sub debt.
Yes, I can say over 40 50 years from time to time, we change our mind.
Okay.
Well said alright, well thanks, guys I appreciate you taking my questions.
Thank you.
Thank you and this concludes our question and answer session I would like to return the Carnival, Bob Martin for any closing comments.
Thank you we appreciate everyone being on the call today, and we look forward.
Having new when we conclude.
Our fiscal year.
On our fourth quarter earnings call.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.