Q3 2021 Landsea Homes Corp Earnings Call

November 10, 2021

Good day, Thank you for standing by and welcome to the land Sea homes third quarter 2021 earnings conference call at.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference. Please press star zero on your telephone.

As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Drew Mackintosh, Sir you may begin.

Yeah.

Welcome to Atlanta homes third quarter earnings call before the call begins I would like to note that this call will include forward looking statements within the meaning of the federal Securities laws.

Lengthy homes caution that forward looking statements are subject to numerous assumptions risks and uncertainties, which change over time.

These risks and uncertainties include but are not limited to the risk factors described by 90 homes in its filings with the Securities and Exchange Commission.

Accordingly forward looking statements should not be relied upon as representing our views as of any subsequent date and you should not place undue reliance on these forward looking statements in deciding whether to invest in our securities.

Additionally, reconciliations of non-GAAP financial measures discussed on this call. The most comparable GAAP measures can be accessed through 90 homes website.

Our SEC filings.

Hosting the call today are John <unk>, Chief Executive Officer, Mike Olson, Chief operating Officer, and Trent Schreiner, Chief Accounting officer with that I'd like to turn the call over to John.

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 our company's outlook.

Nancy homes made progress on a number of fronts in the third quarter of 2021.

We remained on track to generate approximately 1 billion in total revenues for the year.

Greatly enhance our access to capital and continue to lay the foundation for our company's rapid growth.

The vintage of state acquisition has been progressing nicely and we have been aggressive in transitioning their operations and to have more production build builder type mode, while expanding their existing market presence with several new land acquisitions.

We continue to see strong demand for landscapes differentiated product, which features the latest in new home performance and technology and affordable price. These.

These positives from the quarter, along with the company's record quarter.

Quarter, ending backlog give us optimism about the remainder of the year and our outlook for 2022.

While there is a lot to be excited about in terms of our company's future. Today's operating environment continues to be challenged by supply chain issues that are impacting the entire industry.

These issues extended our construction cycle times during the quarter beyond the level that we're comfortable with compelling us to turn.

Our sales efforts and many of our communities, particularly in Arizona.

Our main focus as a homebuilder has always been to do right by the customer and we felt that stretching out an already robust backlog of homes will not be in best interest of our existing customers or new ones.

We have been upfront and transparent with our customers in backlog about issues, we are facing and.

We believe this approach help keep our cancellation rate during the quarter at a manageable 10, 4%.

Despite these operational challenges, we continue to see great growth opportunities for our company driven by strong industry fundamentals favorable long term trends in our markets and our focus on the more affordable segments of the market.

We are rapidly expanding our presence in high growth markets in Florida, Texas, Arizona, and California, and increase our quarter ending count by 46% as.

As compared to the end of 2020.

We have established a successful track record of scaling our operations quickly through a combination of organic growth and acquisitions and believe this trend can continue.

Our ability to deliver on growth aspirations got a boost in the third quarter with the establishment of a $500 million unsecured revolving credit facility with an accordion feature that permits increases and.

And borrowing capacity up to an additional $350 million.

New facility replaces the cumbersome project financing other capital sources that put us at a competitive disadvantage with other builders.

Thanks to the commitment from our new lending partners Western Alliance Bank Bank of America, and the rest of the syndicate. We now have the available capital to act more quickly on opportunities when they arise and can meet and compete more effectively for land deals at a lower cost of capital.

With that I'd like to turn the call over to Mike who will provide more detail on our homebuilding operations.

Thanks, John and good morning to everyone.

Solid demand trends at our communities in the third quarter as buyers continue to gravitate to our innovative high performance homes, which featured the latest new home technology sustainability healthy lifestyle and performance at an affordable price.

Our markets continue to exhibit favorable industry fundamentals characterized by low levels of inventory healthy local economies and a motivated pool of buyers.

In addition to the ANZ as high performance home program. Our Lyft Flex features focused on technology forward home offices personal fitness firms or educational spaces to meet the lifestyle demands of today's homebuyers.

These thoughtful look flux packages are optioned for a convenient space ready upon move in for our homeowners to automate and to enhance their lifestyle needs.

As John mentioned supply chain issues continued to be a challenge for our industry during the quarter and we had to pull the cadence of our sales efforts as a result.

While these operational issues were present at all of our markets. They were especially acute in Arizona, which is our largest market compounding the delays and lack of building materials throughout the construction process was a labor shortage that has been ongoing in the market for some time.

This is not a situation that is unique to land sea, but we're working diligently to alleviate the bottleneck in our operations and deliver homes in a timely manner.

While not sacrificing the quality level of our homes that are home buyers expect Atlanta homes.

We have already made progress on this front and as a result, we are increasing our annual revenue target to approximately 1.0 to two $1.06 billion.

Additionally, we have already seen an improvement in our orders in October as we lifted limitations on sales and opened more new communities.

Our orders in the month of October was 129 at an absorption pace of $3 five representing an orders increase of 18% month over month.

Our California operations posted the best sales pace during the quarter at four three homes per community per month.

Both northern and Southern California, Atlanta homes has demonstrated an ability to outsell the competition with our unique combination of new home innovation and affordability.

Two new communities at Ellis Masterplan in Tracy average.

0.5 sales per month during the quarter, which was well above the comparable communities in the area.

Southern California, our neighborhoods in the shade tree Master plan in Ontario also outsold the competition during the quarter, even as we continued to raise prices.

We have established a sizable presence in southern California.

And expect to deliver over 450 homes in the market for all of 2021.

We continue to see solid industry fundamentals in the markets that we entered through our acquisition of vintage of states as all of our communities performed at or above our underwriting assumptions during the quarter.

The merchandising and marketing efforts have been successfully converted over to Lindsay homes brand and we expect those systems to be fully integrated into our platform by the end of the year.

Florida, and Texas will serve as an engine for much of our company's growth going forward and we are aggressively pursuing land deals in each of these states.

Florida, we secured six new land deals during the quarter, which we feel will complement our existing presence in the market nicely.

In Texas, we made great progress transitioning to the current product profile from a semi custom high end operation.

One that focuses on affordability and quick inventory turns we made a sizable investment in the market during the quarter, securing 918 lots in Austin, which gives us a great platform for which to grow our business and this excellent market.

Lindsey has established a track record of entering new markets via acquisition and scaling the local operations in a rapid fashion and we believe the same will be true with interested states acquisition.

Now I'd like to turn our call over to our Chief Accounting Officer, Trent Schreiner, who will provide more detail on the results for the quarter and give you an update on our guidance correct.

Thanks, Mike.

Total revenue for the third quarter of 2021 was $214 million compared to $219 million in the third quarter of 2020.

Within our total revenue, we generated $5 million from lot sales and other revenue compared to no lot sales and other revenue in the third quarter of 2020.

Home sales revenue decreased to $209 million compared to $219 million in the prior year period.

Total homes delivered during the quarter decreased 12% to 380 homes at an average sales price of 549 779 compared to <unk>.

433 homes delivered at an average sales price of 504658 in the third quarter of 2020.

The decline in deliveries was largely a result of the ongoing supply chain issues affecting the industry.

The year over year increase in average selling prices was due to the favorable pricing power experienced in the Arizona market and a large number of deliveries from communities with higher end homes.

During the third quarter, we generated 275, new home orders with a dollar value of $185 million on a monthly absorption rate of 2.1 or two six sales per active community.

This compares to 504 homes with a dollar value of $279 million in our monthly absorption rate of five nine sales per active community in the prior year period.

The year over year decline in orders was largely a result of the company's decision to temporary temporarily slow the pace of sales to adjust for lengthening production cycle times.

Total homes in backlog increased 18% to 1092 homes with a dollar value of $606 million and an average sales price of 555000 at September 32021.

This compares to 922 homes with a dollar value of $440 million and an average sales price of 477000 at September 30th 2020.

GAAP gross margins expanded.

250 basis points year over year to 16, 1% in the third quarter.

On an adjusted basis home sales gross margin increased 100 basis points to 21, 4% compared to 24% in the prior year period.

The benefits to our adjusted gross margin is primarily due to price appreciation across our markets and improving profitability within our California segment, particularly offset by higher costs.

Net income attributable to Lindsay homes in the third quarter increased to $10 8 million compared to net income of $3 2 million in the prior year period.

Adjusted net income attributable to land sea homes was $8 3 million compared to $9 8 million in the prior year period.

Adjusted EBITDA increased to $22 6 million compared to $16.2 million in the prior year quarter.

Turning to the balance sheet, we ended the third quarter was $82 million in cash and cash equivalents.

Total equity of $580 million and total debt of $363 million or.

Our ratio of debt to capital at the end of the third quarter was 38, 4% compared to 33, 3% at December 31, 2020, and our debt to net book capitalization ratio was 32, 5% compared to 22, 6% at December 31.

2020.

As John mentioned earlier, the company established a 500 million unsecured revolving credit facility with an accordion feature that.

Permits increases to borrowing capacity up to an additional $350 million.

As of the closing date of our unsecured revolving credit facility on October six we had $296 million in borrowings outstanding under the new credit facility and we had available borrowing capacity of approximately $204 million.

Including cash on hand after the closing we had total liquidity of approximately $306 million.

As of the closing of our new unsecured revolving credit facility on October six we had $296 million in borrowing outstanding under the new credit facility and we had availability available borrowing capacity at approximately $204 million.

Including cash on hand after the closing we had total liquidity of approximately $392 million.

Now I'd like to summarize our updated forward looking guidance.

For the full year 2021, we now expect to report total revenues of between 1.02 billion to 1.16 billion.

$960 million to $1 2 billion prior.

With 1671 to 1760 total homes now expected to be delivered at an average sales price of 450000 to 580000.

GAAP home sales gross margin is expected to be 16, 9% to 17, 8% and adjusted home sales gross margin is expected to be $21 nine to $22 five.

Finally, adjusted net income attributable to land Sea home homes is expected to be between <unk> $62 million to $66 million.

Ft $3 million to $61 million prior and 2021.

Now I will turn the call back over to John for some closing remarks.

Thanks Trent.

In conclusion I am pleased with the progress we've made this quarter.

Ongoing supply chain issues present, a near term headwind for homebuilding they do not alter the long term outlook for industry or a company.

We believe the demand drivers have propelled the halls housing market since the beginning of this cycle will continue for the foreseeable future.

While our high performance home offerings, and affordable product focus should allow <unk> to gain market share.

We have been one of the fastest growing homebuilders in the country over the last several years and believe this trend will continue thanks to our strong capital position and a proven model for expanding our operations.

Progress we made this quarter, coupled with our new credit facility should help US continue on this path and as a result, we are excited about what the future holds for Lansing.

That concludes our prepared remarks, and now I'd like to open the call to questions operator.

Thank you.

Remainder to ask a question at this time, you will need to press star one on your telephone keypad again that is star one to ask a question to withdraw the question just press the pound key.

Your first question comes from the line of Alex Rygiel from B Riley. Your line is now open.

Thank you and good morning, gentlemen.

Couple of quick questions here.

It sounds great that pure cadence of sales has picked up in October how should we think about the cadence of closings through the fourth quarter given your commentary about lead times stretching to the rights.

Hi, Alex its Mike for something.

I believe we're through.

The bulk of the large challenges that we've faced with during the cycle times in terms of the production in 2021.

It started with concrete getting slabs out in front of us moved into lumber.

And then HVAC.

The last challenge has really been the windows.

But we've seen a major pickup in that area over the last months to 45 days, which is.

<unk> given us a high level of confidence that.

The bulk of the large installation challenges and larger material installations are behind us.

We have been able to find ways going forward from here.

To get our closings, whether it be installing temporary garage doors or appliances that maybe temporary for a period of time until the.

Actual appliance for that home comes in.

And were going to install it. So we believe we have a lot more optionality.

To move the house through and get us to the final closings going forward.

That's good to hear and then could you also give us an update.

<unk>.

Sales in New York.

Sure I'll turn that over to John.

Hey, Alex.

Mike and I are actually back in New York last week and.

Sales pace has really picked up in New York.

We're about nearly.

Nearly 40% sold out at for Arena now.

So much further ahead than we anticipated at this time of the year. So good good sales pace absorption there.

The pricing that.

Is that.

Pre COVID-19.

And as it relates to that 40% sold out what does the pace of deliveries looked like for freedom when should we start to see those curves.

Yeah.

Those will begin in mid to late January we are working right now on getting our temporary occupancy.

We're pulling down all the scaffolding.

Actual building units themselves are now coming towards completion.

The interior.

The lobby has been completed so the building is very close to being turned over on the floors. So that we can start making those closings and moving people in.

That's excellent and then my last question.

As it relates to the guidance I'm, having a little bit of difficulty.

When I when I look at your revenue guidance for the fourth quarter. It seems to suggest the asp's are going to be very very high is that a function of marina.

Alex This is John it's actually a function of one of our communities in Northern California.

All of the relevant.

Those are at a higher price point and taken about $2 million.

So that's what's pulling that up.

Perfect. Thank you very much.

Thanks, Alex Thank you.

Again to ask a question. Please press Star then number one on your telephone.

Your next question comes from the line of Matthew Bouley from Barclays and lifestyle.

Hi, This is Ashley Kim on for Matt today.

So thanks for all the detail on the October trends can you talk about how that sales pace compares to your level of starts that you saw in the month.

And then that kind of coupled with the closings commentary how that positions you from the supply standpoint to grow orders next year.

Sure Ashley this is Mike I'll take a stab at it first John can clean it up after.

From the standpoint of where we are I believe we're seeing sales moving back towards.

What we call sort of a normalization of or absorption rates that we would hope for four out of our communities.

September was a strong month, when we released more homes for sale and then October got even better and we're seeing really great sales trends going into November.

These are which we have open.

We continue to get a moderate price increases not to the extent that we've seen before but we continue to be able to have pricing power at our communities and to some degree we've seen some leveling off on.

Some costs, but those costs really relate back into what's going to happen in 2022.

Uh huh.

What we did in the summer I called it a strategic was generally a strategic pause around our sales efforts because we had for the most part.

Baked in what we anticipated being able to deliver in 2021. So we were just selling really into 2022.

Way too far ahead of really our ability to catch up with that demand.

So it was really a thoughtful.

Process around managing those sales through the summer.

Also we wanted to signal to our existing.

Homebuyers are future homebuyers that are in escrow that we're concentrating on them we were getting some feedback that.

We were having sales releases, but yet our production was slowing and that we were hit delaying some of the closing dates.

And at the end of the day, our customer is priority number one for us and we wanted to make sure that we were focusing in on the business at hand, and what we had in front of us and that to some degree what we thought we had to push into 2022, we were willing to do that and moderate sales so that we.

We could concentrate on getting these houses built for the customers that we have in hand today to make our 2021 business plan.

That we were comfortable with.

Sure.

And.

This is John just to add on that as it relates to starts in this fourth quarter, we actually have seven.

<unk> been more communities that will be opening up in this fourth quarter and as a result.

With these orders and he is opening of new communities will have more sites in this fourth quarter as well.

Okay.

Got it thanks for that and then just appreciating the focus on entry level can you talk about any indicators from buyers that the lift in asps.

The affordability L.

And some of our markets, particularly on the outskirts of Phoenix, We're starting to hit some affordability ceilings, we believe not that there isn't desire out there, but the fact of getting qualified or having the ability to put up the downpayment necessary. So we are starting to see a bit of a leveling off.

And some of those areas.

We're also seeing probably a little bit more.

What I was trying to find the word but discretion from the buyer in terms of making sure that they're going to get the locked in the home that they want.

Last year or during the spring if we had a release.

Pretty much they were all snapped up very quickly like within hours.

And I think that was preparing indiscriminate now we're finding that at these price points.

Purchase to the end of some of our communities our buyers are willing to.

Step back and wait for another release, that's going to get them the house.

The lot the elevation of the color that they want and that's definitely what we're seeing too.

Thanks for all the detail and good luck on the quarter. Thank you.

Speakers there are no further questions at this time. This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.

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Good day, Thank you for standing by and welcome to the landfill homes third quarter 2021 earnings conference call.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference. Please press star zero on your telephone.

As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Drew Mackintosh, Sir you may begin.

Welcome to Atlanta homes third quarter earnings call.

For the call begins I would like to note that this call will include forward looking statements within the meaning of the federal Securities laws.

Lindsay homes caution that forward looking statements are subject to numerous assumptions risks and uncertainties, which change over time.

These risks and uncertainties include but are not limited to the risk factors described by 90 homes in its filings with the Securities and Exchange Commission.

We do not undertake any obligation to update forward looking statements to reflect events or circumstances. After the date. They were made whether as a result of new information future events or otherwise, except as may be required under applicable securities laws. Additionally, reconciliations of non-GAAP financial measures discussed on this call the most comparable GAAP measure.

It can be accessed through 90 homes website.

The SEC filings.

Hosting the call today are John <unk>, Chief Executive Officer, Mike Olson, Chief operating Officer, and Trent Schreiner, Chief Accounting Officer.

I'd like to turn the call over to John.

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 our company's outlook.

Well, let's see homes made progress on a number of fronts in the third quarter of 2021.

We remained on track to generate approximately 1 billion in total revenues for the year.

<unk> enhanced our access to capital and continue to lay the foundation for our company's rapid growth.

We continue to see strong demand for Lance as differentiated product, which features the latest in new home performance and technology and affordable price.

These positives from the quarter, along with the company's record quarter.

Quarter, ending backlog give us optimism about the remainder of the year and our outlook for 2022.

While there's a lot to be excited about in terms of our company's future. Today's operating environment continues to be challenged by supply chain issues that are impacting the entire industry.

These issues extended our construction cycle times during the quarter beyond the level that we're comfortable with compelling us to convert our sales efforts and many of our communities, particularly in Arizona.

Our main focus as a homebuilder has always been to do right by the customer and we felt that stretching out an already robust backlog of homes will not be in best interests of our existing customers or new ones.

We have been upfront and transparent with our customers in backlog about issues, we are facing and.

We believe this approach help keep our cancellation rate during the quarter at a manageable 10, 4%.

We are rapidly expanding our presence in high growth markets in Florida, Texas, Arizona, and California, and increase our quarter ending locked count by 46% as.

As compared to the end of 2020.

We have established a successful track record of scaling our operations quickly to a combination of organic growth and acquisitions and believe this trend can continue.

Our ability to deliver on our growth aspirations got a boost in the third quarter with the establishment of a 500 million unsecured revolving credit facility with an accordion feature that permits increases and.

And borrowing capacity up to an additional $350 million.

This new facility replaces the cumbersome project financing and other capital sources that put us at a competitive disadvantage with other builders.

Thanks to the commitment from our new lending partners Western Alliance Bank Bank of America, and the rest of the syndicate. We now have the available capital to act more quickly on opportunities when they arise and can compete more effectively for land deals at a lower cost of capital.

With that I'd like to turn the call over to Mike who will provide more detail on our homebuilding operations.

Thanks, John and good morning to everyone.

Our markets continue to exhibit favorable industry fundamentals characterized by low levels of inventory healthy local economies and a motivated pool of buyers.

In addition to the ANZ as high performance home program. Our lead Flex features focused on technology forward home offices personal fitness firms or educational spaces to meet lifestyle lifestyle demands of today's homebuyers.

These thoughtful influx packages our options for a convenient space ready upon move in for homeowners to automate and to enhance their lifestyle needs.

As John mentioned supply chain issues continued to be a challenge for our industry during the quarter and we had to slow the cadence of our sales efforts as a result.

This is not a situation that is unique to land and see but we are working diligently to alleviate the bottleneck in our operations and deliver homes in a timely manner.

While not sacrificing the quality level of our homes that our homebuyers expect Atlanta homes.

We have already made progress on this front and as a result, we are increasing our annual revenue target to approximately 1.0 to two $1.06 billion.

Additionally, we have already seen an improvement in our orders in October as we looked at limitations on sales and open more new communities. Our orders in the month of October. It was 129 at an absorption pace of $3 five representing an orders increase of 18% month over month our COO.

California operations posted the best sales pace during the quarter at four three homes per community per month.

And both northern and Southern California, Atlanta homes has demonstrated an ability to outsell the competition with our unique combination of new home innovation and affordability.

Our two new communities at Ellis Masterplan in Tracy averaged 5.5 sales per month during the quarter, which was well above the comparable communities in the area.

In southern California, our neighborhoods in the shade tree Masterplan in Ontario also outsold the competition during the quarter, even as we continued to raise prices.

We have established a sizable presence in southern California, and it's and expect to deliver over 450 homes in the market for all of 2021.

We continue to see solid industry fundamentals in the markets that we entered through our acquisition of vintage as states and all of our communities performed at or above our underwriting assumptions during the quarter.

The merchandising and marketing efforts have been successfully converted over to Lance <unk> homes brand and we expect their systems to be fully integrated into our platform by the end of the year.

Florida, and Texas will serve as an engine for much of our company's growth going forward and we are aggressively pursuing land deals in each of these states.

Florida, we secured six new land deals during the quarter, which we feel will complement our existing presence in the market nicely.

In Texas, we made great progress transitioning to the current product profile.

Semi test some high end operation to one that focuses on affordability and quicker inventory turns.

A sizable investment in the market during the quarter, securing 918 lots in Austin, which gives us a great platform for which to grow our business and this excellent market.

ANZ has established a track record of entering new markets via acquisition and scaling the local operations in a rapid fashion and we believe the same will be true with interested states acquisition.

Now I'd like to turn our call over to our Chief Accounting Officer, Trent Schreiner, who will provide more detail on the results for the quarter and give you an update on our guidance correct.

Thanks, Mike.

Total revenue for the third quarter of 2021 was $214 million compared to $219 million in the third quarter of 2020.

Within our total revenue, we generated $5 million from lot sales and other revenue compared to no lot sales and other revenue in the third quarter of 2020.

Home sales revenue decreased to $209 million compared to $219 million in the prior year period.

Total homes delivered during the quarter decreased 12% to 380 homes at an average sales price of 549 779 compared to 433 homes delivered at an average sales price of 504658.

In the third quarter of 2020.

The decline in deliveries was largely a result of the ongoing supply chain issues affecting the industry.

The year over year increase in average selling prices was due to the favorable pricing power experienced in the Arizona market and a large number of deliveries from communities with higher end homes.

During the third quarter, we generated 275, new home orders with a dollar value of $185 million on a monthly absorption rate of 2.1 or two six sales per active community.

This compares to 504 homes with a dollar value of $279 million and a monthly absorption rate of five nine sales per active community in the prior year period.

The year over year decline in orders was largely a result of the company's decision to temporary temporarily slow the pace of sales to adjust for lengthening production cycle times.

Total homes in backlog increased 18% to 1092 homes with a dollar value of $606 million and an average sales price of 555000 at September 32021.

This compares to 922 homes with a dollar value of $440 million and an average sales price of 477000 at September 32020.

GAAP gross margins expanded.

250 basis points year over year to 16, 1% in the third quarter.

On an adjusted basis home sales gross margin increased 100 basis points to 21, 4% compared to 24% in the prior year period.

The benefits to our adjusted gross margin is primarily due to price appreciation across our markets and improving profitability within our California segment, particularly offset by higher costs.

Net income attributable to Lindsay homes in the third quarter increased to $10 8 million compared to net income of $3 2 million in the prior year period.

Adjusted net income attributable to land sea homes was $8 3 million compared to $9 8 million in the prior year period.

Adjusted EBITDA increased to $22 6 million compared to $16.2 million in the prior year quarter.

Turning to the balance sheet, we ended the third quarter was $82 million in cash and cash equivalents.

Total equity of $580 million and total debt of $363 million.

2020.

As John mentioned earlier, the company established a 500 million unsecured revolving credit facility with an accordion feature that permits increases to borrowing capacity up to an additional $350 million.

Including cash on hand after the closing we had total liquidity of approximately $306 million.

As of the closing of our new unsecured revolving credit facility on October 6th we had $296 million in borrowing outstanding under the new credit facility and we had availability available borrowing capacity at approximately $204 million.

Including cash on hand after the closing we had total liquidity of approximately $392 million.

Now I'd like to summarize our updated forward looking guidance.

For the full year 2021, we now expect to report total revenues of between 1.02 billion to 1.16 billion.

960 million to 102 billion prior.

With 1671 to 1760 total homes now expected to be delivered at an average sales price of 450000 to 580000.

GAAP home sales gross margin is expected to be 16, 9% to 17, 8% and adjusted home sales gross margin is expected to be $21 nine to $22 five.

Finally, adjusted net income attributable to land Sea home homes is expected to be between <unk> $62 million to $66 million.

<unk> $3 million to $61 million prior in 2021.

Now I'll turn the call back over to John for some closing remarks.

Thanks Ryan.

In conclusion I am pleased with the progress we've made this quarter.

Ongoing supply chain issues present, a near term headwind for homebuilding they do not alter the long term outlook for industry or a company.

We believe the demand drivers have propelled the housing market since the beginning of this cycle will continue for the foreseeable future.

While our high performance home offerings, and affordable product focus should allow <unk> to gain market share.

We had been one of the fastest growing homebuilders in the country over the last several years and believe this trend will continue thanks to our strong capital position and a proven model for expanding our operations.

Progress we made this quarter, coupled with our new credit facility should help US continue on this path and as a result, we are excited about what the future holds for Lansing.

That concludes our prepared remarks, and now I'd like to open the call to questions operator.

Thank you as a reminder to ask a question at this time you will need to press star one on your telephone keypad again that is star one to ask that question.

We drilled a question just press the pound key.

Your first question comes from the line of Alex Rygiel from B Riley. Your line is now open.

Thank you and good morning, gentlemen.

Yeah.

Couple of quick questions here.

It sounds great that are pure cadence of sales has picked up in October how should we think about the cadence of closings through the fourth quarter given your commentary about lead times stretching to the rights.

Hi, Alex It's Mike Brosnan.

I believe we're through.

The bulk of the large challenges that we've faced with during the cycle times and threw the production in 2021.

It started with concrete and getting slabs out in front of us moved into lumber.

And then <unk> and glass challenge has really been the windows, but.

But we've seen a major pickup in that area over the last months to 45 days, which is.

<unk> given us a high level of confidence that.

The bulk of the large installation challenges and larger material installations are behind us.

We have been able to find ways going forward from here.

To get our closings, whether it be installing temporary garage doors or appliances that maybe temporary for a period of time until the.

Actual appliance for that home comes in.

And we can install it so we believe we have a lot more optionality.

To move the house through and get us to the final closings going forward.

That's good to hear and then could you also give us an update.

<unk>.

Net sales in New York.

Sure I'll turn it over to John.

Yeah, Hey, Alex.

I can I'll actually back in New York last week and.

The sales pace has really picked up in New York.

Whereabouts.

Nearly 40% sold out at for Arena now so much further ahead than we anticipated at this time of the year. So good good sales pace absorption there and at a pricing that is.

Is that a pricing pre COVID-19.

Yeah.

And as it relates to that 40% sold out what does the pace of deliveries looked like for freedom when should we start to see those curves.

Those will begin in mid to late January we are working right now on getting our temporary occupancy.

Pulling down all the scaffolding.

We will building units themselves are now coming towards completion.

On the interior.

And the lobby has been completed so the building is very close to being turned over on the floors. So that we can start making those closings and moving people in.

That's excellent and then my last question.

As it relates to the guidance I'm, having a little bit of difficulty.

When I look at your revenue guidance for the fourth quarter. It seems to suggest the asp's are going to be very very high is that a function of marina.

Alex This is John it's actually a function of one of our communities in northern California are called.

Call it relevant.

Or at a higher price point I think it's about $2 million trailers. So that's what's pulling that up.

Perfect. Thank you very much.

Thanks, Alex Thank you.

Again to ask a question. Please press Star then number one on your telephone.

Your next question comes from the line of Matthew Bouley from Barclays. Your line is open.

Hi, This is Ashley Kim on for Matt today.

So thanks for all the detail on the October trends can you talk about how that sales pace compares to your level of starts that you saw in the month.

And then that kind of coupled with the closings commentary how that positions you from a supply standpoint to to grow orders next year.

Sure.

Sure This is Mike.

Take a stab at it first John can clean it up after.

From the standpoint of where we are I believe we are.

Seeing sales moving back towards.

What we call sort of a normalization of or absorption rates that we would hope for hope for out of our communities.

September was a strong month, when we released more homes for sale and then October got even better.

And we're seeing really great sales trends going into November and the communities in which we have opened.

Continue to get a moderate price increases not to the extent that we've seen before but we continue to be able to have pricing power at our communities and to some degree we've seen some leveling off on.

Some costs, but those costs really relate back into what's going to happen in 2022.

So.

What we did in the summer I called it a strategic was generally a strategic pause around our sales efforts because we had for the most part.

Baked in what we anticipated being able to deliver in 2021. So we were just selling really into 2022.

Way too far ahead of really our ability to catch up with that demand. So it was really a thoughtful.

Process around managing those sales through the summer.

Also we wanted to signal to our existing.

Homebuyers are future homebuyers that are in escrow that we're concentrating on them we were getting some feedback that.

We were having sales releases, but yet our production was slowing and that we were hit delaying some of the closing dates.

We could concentrate on getting these houses built for the customers that we have in hand today to make our 2021 business plan.

That we were comfortable with.

And.

This is John just to add on that as it relates to start this fourth quarter, we actually have.

Seven more communities that will be opening up in the fourth quarter and as a result.

With these orders and he's opening of new communities will have more strides in this fourth quarter as well.

Okay.

Got it thanks for that and then just appreciating the focus on entry level can you talk about any indicators from buyers that the lift in asps.

Got you so far ability L.

And some of our markets, particularly on the outskirts of Phoenix, We're starting to hit some affordability ceilings, we believe not that there isn't a desire out there, but the fact of getting qualified or having the ability to put up the downpayment necessary. So we are starting to see a bit of a leveling off.

And some of those areas.

We're also seeing probably a little bit more.

Yes.

What I'm trying to find the word but discretion from the buyer in terms of making sure that they're going to get the locked in the home that they want.

Last year or during the spring if we had a release.

Pretty much they were all snapped up very quickly like within hours.

And I think that was fairly indiscriminate now we're finding that at these price points as we approach the end of some of our communities our buyers are willing to.

Step back and wait for another release, that's going to get them the house.

The lot the elevation of the color that they want and that's definitely what we're seeing too.

Thanks for all the detail and good luck on the quarter. Thank you.

Speakers there are no further questions at this time. This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.

Q3 2021 Landsea Homes Corp Earnings Call

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