Q4 2021 Landsea Homes Corp Earnings Call
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Ladies and gentlemen, thank you for standing by, and welcome to the Lansing Homes fourth quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode.
Ladies and gentlemen, thank you for standing by and welcome to the land Sea homes fourth quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press Star then zero I would now like to turn.
To ask a question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 1.
The conference over to your Speaker for today Drew Mackintosh Investor Relations you may begin.
Speaker Change: Good morning, and welcome to Lansing Home's fourth 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 law.
Good morning, and welcome to Atlanta homes fourth 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 law.
Lansky homes caution that forward looking statements are subject to numerous assumptions risks and uncertainties, which change over time.
Speaker Change: Lansky-Holmes cautions that forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time.
Speaker Change: These risks and uncertainties include but are not limited to the risk factors described by Lancey Holmes and its filings with the Cert Securities and Exchange Commission.
These risks and uncertainties include but are not limited to the risk factors described by Nancy 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. We do not undertake any obligation to update forward looking statements to reflect events or circumstances. After the date.
Speaker Change: Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and you should not place any reliance on these forward-looking statements in deciding whether to invest in our security.
Speaker Change: 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 it may be required under applicable securities law.
They were made whether as a result of new information future events or otherwise, except as may be required under applicable securities laws.
Speaker Change: Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Lansky Homes website in its
Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through land T homes website.
And in its SEC filings.
Speaker Change: Hosting the call today are John Ho, Lancey's Chief Executive Officer, Mike Forsum, Chief Operating Officer, and Chris Porter, Chief Financial Officer. With that, I'd like to
Hosting the call today are John <unk>, Chief Executive Officer, Mike Foursome, Chief operating Officer, and Chris Boerner, Chief Financial Officer.
With that I'd like to turn the call over to John .
John Ho: Good morning, and thank you for joining us today as we go over our results for the fourth quarter and full year 2021 and provide an update on the outlook for our company. I want to start by thanking the entire Lansing team for their exceptional effort this year and for achieving some major milestones as we completed our first year as a public company.
Good morning, and thank you for joining us today as we go over our results for the fourth quarter and full year 2021, and provide an update on the outlook for our company.
I want to start by thanking the entire landscape team for their exceptional effort this year and for achieving some major milestones as we completed our first year as a public company.
John Ho: Thanks to this total team effort, Lansi Homes finished 2021 on a strong note as we met or exceeded our previously stated guidance by exceeding $1 billion total revenues, achieving adjusted home gross margin of 22.6%, and eclipsing adjusted net income of $67 million for the year.
Thanks to this total team effort Lantzy homes finish 2021 on a strong note as we met or exceeded our previously stated guidance by exceeding 1 billion total revenues.
<unk> adjusted home gross margin of 22, 6% and eclipsing adjusted net income of 67 million for the year.
John Ho: Additionally, we generated earnings of $1.14 per share on a gap basis for 2021, or $1.48 per share on a fully adjusted basis.
Additionally, we generated earnings of $1 14 per share on a GAAP basis for 2021 or $1 48 per share on a fully adjusted basis.
John Ho: For the fourth quarter, Lansing posted earnings of $0.83 per share, driven by a 40% year-over-year increase in total revenue and a 650 basis point improvement in gross margin to 21.5%.
For the fourth quarter Lastly posted earnings of 83 to <unk> 83 per share driven by 40% year over year increase in total revenue and a 650 basis point improvement in gross margin to 21, 5%.
John Ho: as our teams did an excellent job executing on our business plan in what continues to be a challenging operating environment.
As our teams did an excellent job executing on our business plan and what continues to be a challenging challenging operating environment.
John Ho: From a macro perspective, housing fundamentals continue to be extremely favorable for new home demand.
From a macro perspective housing fundamentals continue to be extremely favorable for new home demand.
John Ho: Supply of existing homes available for sale remains exceptionally low, as evidenced by the most recent report from the National Association of Realty.
Ply of existing homes available for sale remains exceptionally low as evidenced by the most recent report from the National Association of Realtors, which indicated that total housing inventory amounted to 860000 units at the end of January .
John Ho: which indicated that total housing inventory amounted to 860,000 units at the end of January , a record low and down 16.5% from one year ago. This equates to a 1.6 month supply at the current sales pace, which is well below equilibrium in a normal housing market.
Record low LOE and down 16, 5% from one year ago.
This equates to a 1.6 months supply at the current sales pace, which is well below equilibrium in a normal housing market.
John Ho: On the demand front, we continue to see a deep pool of motivated buyers in our markets.
On the demand front, we continue to see a deep pool of motivated buyers in our markets.
John Ho: Thanks to the ongoing housing supply shortage, but also as a result of favorable demographics, rising incomes, in-migration from other high-cost areas, and a cultural shift in attitudes towards home ownership brought about by the pandemic.
Thanks to the ongoing housing supply shortage, but also as a result of favorable demographics rising incomes in migration from other high cost areas and a cultural shift in attitudes towards home ownership brought about by the pandemic.
John Ho: We believe these demand dryers will be in place for some time and will provide a tailwind for our industry for years to come.
We believe these demand drivers will be in place for some time and will provide a tailwind for our industry for years to come.
John Ho: We also believe Lansing is well positioned to deliver growth in excess of the overall industry's rate thanks to the positive fundamentals in the markets in which we build, our entry level focus, and the appeal of our high-performance homes.
We also believe Lance he is well positioned to deliver growth in excess of the overall industry's rate. Thanks to the positive fundamentals in the markets in which we build our entry level focus and the appeal of our high performance homes.
John Ho: Lansing has strategically established a presence in some of the fastest-growing home building markets in the country, including select markets within California, Arizona, Florida, and Texas.
Landsea strategically establish a presence in some of the fastest growing homebuilding markets in the country, including select markets within California, Arizona, Florida and Texas.
John Ho: Our goal is to focus on becoming one of the top builders in these markets, both through organic expansion and M&A activity, as we believe it is better to be a bigger player in a handful of markets, rather than a small player in many markets.
Our goal is to focus on becoming one of the top builders in these markets both through organic expansion and M&A activity as well.
We believe it is better to be a bigger player in a handful of markets rather than a small player in many markets.
John Ho: This was the rationale behind our acquisition of Garry Walker Homes in January of 2020, our acquisition of Vintage Estate Homes in May of 2021, and most recently our acquisition of Hanover Family Builders in January of this year.
This was the rationale behind our acquisition of Walker homes in January of 2020, our acquisition of vintage as stay at homes in May of 2021, and most recently our acquisition of Hanover family builders in January of this year.
John Ho: Each of these transactions either established or greatly enhanced our market positioning in key home building markets that we believe are primed for long-term growth.
Each of these transactions either established or greatly enhanced our market positioning and key homebuilding markets that we believe are primed for long term growth.
John Ho: The acquisition of Hanover Family Builders was a big win for our company.
The acquisition of Hanover family builders was a big win for our company.
John Ho: as it not only vaulted Lansi into a leading position within the central Florida market.
Is it not only voltage Atlanta into a leading position within the central Florida market. It also provided us with an excellent pipeline of lots at a favorable land basis.
John Ho: It also provided us with an excellent pipeline of lots at a favorable land-based system.
John Ho: In addition, Hanover's Land Light strategy and entry-level focus align strongly with our returns-focused business model and product positioning goals.
Dish and hangovers land light strategy and entry level focus aligns strongly with our returns focused business model and product positioning goes.
John Ho: We have already made excellent progress integrating Hanover into our existing home building platform and expect the acquisition to be extremely accretive to earnings this year and beyond.
We have already made excellent progress integrating hangover into our existing homebuilding platform and expect the acquisition to be extremely accretive to earnings this year and beyond.
John Ho: I want to personally welcome the Hanover team into the Lancey family and look forward to building on the great track record of success you've achieved in Florida.
I want to personally welcome to Hanover team into the Lansing family and look forward to building on the great track record of success you've achieved in Florida.
John Ho: Our product focus continues to be on the more affordable segments of the market, as we believe this is the most supply-constrained and demand-heavy area of housing.
Our product focus continues to be on the more affordable segments of the market. As we believe this is the most supply constrained and demand heavy area of housing.
John Ho: First-time buyers looking for affordable housing options are being met with rapidly rising existing home prices and a lack of homes for sale that meet their budget.
First time buyers looking for affordable housing options are being met with rapidly rising existing home prices and a lack of homes for sale that would meet their budget.
John Ho: We believe this dynamic will persist for the foreseeable future and have positioned our company to cater to these buyers. Performa, our acquisition of Hanover, 77% of our own and control lots are targeted at the entry-level segment, giving us a great runway of lots to meet the demand for affordable housing that we see in our market.
We believe this dynamic will persist for the foreseeable future and have positioned our company to cater to these buyers pro forma our acquisition of Hanover, 77% of our owned and controlled lots are targeted at the entry level segment, giving us a great runway of lots to meet the demand for affordable housing that we see in our markets.
John Ho: Along with our affordable product focus, we continue to differentiate ourselves from the competition with our high-performance homes, which feature the latest in new home automation, sustainability, energy savings, and healthy lifestyle.
Along with our affordable product focus we continue to differentiate ourselves from the competition with our high performance foams, which featured the latest new home automation sustainability energy savings and healthy lifestyle.
John Ho: We recognize that today's buyer is looking to get more out of their home than ever before, whether it's better connectivity for a home office, enhanced automation for ease of use, energy efficiency, or other smart home innovations that reduce the total cost of home ownership.
We recognize that today's buyers looking to get more out of their homes than ever before whether it's better connectivity for a home office enhanced automation for ease of use energy efficiency or other smart home innovations that reduce the total cost of home ownership.
John Ho: Our high-performance home gave us a noticeable sales advantage over a similarly priced product from our competition in 2021, and we expect that to continue in 2022.
Our high performance home gave us a noticeable sales advantage over similarly priced product from our competition in 2021, and we expect that to continue in 2022.
Speaker Change: Before I turn the call over to Mike, I would like to formally welcome Chris Porter to our executive
Before I turn the call over to Mike I would like to formally welcome Chris Porter to our executive team.
Mike Forsum: Chris officially joined Lancey as our CFO in December of last year and has already made a meaningful impact on the financial aspects of our business.
This officially joined Lance he is our CFO CFO in December of last year.
Already made a meaningful impact on the financial aspects of our business I am confident Chris is going to be a great asset for our company. As we proceed pursue our growth initiatives with that I'd like to turn the call over to Mike who will provide more detail on our operations this quarter.
Mike Forsum: I'm confident Chris is going to be a great asset for our company as we pursue our growth initiatives. With that, I'd like to turn the call over to Mike, who will provide more detail on our operations this quarter.
Mike Forsum: Thanks, John . And I, too, would like to welcome Chris into the fold and look forward to working with him to achieve our financial goals and operational goals as well.
Thanks, John and I too would like to welcome Chris into the fold and look forward to working with him to achieve our financial goals and operational goals as well.
Mike Forsum: I will get into a little more detail in a minute, but as John mentioned, demand has been strong across the geographic footprint and with each of our product segments, despite the recent increase in mortgage rates.
We'll get into a little more detail in a minute, but as John mentioned demand has been strong across the geographic footprint and with each of our product segments. Despite the recent increase in mortgage rates.
Mike Forsum: New home sales pace remains robust throughout the fourth quarter of 2021, as evidenced by our net new orders of 4.2 homes per community per month.
New home sales pace remained robust throughout the fourth quarter of 2021 as evidenced by our net new orders up 4.2 homes per community per month.
Mike Forsum: This demand strength carried into 2022 and actually accelerated in the first two months of the year as we recorded a sales increase of 20% year-over-year to 136 sales for January and 40% year-over-year to 151 sales for February .
This demand strength carried into 2022 and actually accelerated in the first two months of the year as we recorded a sales increase of 20% year over year to 136 sales for January and 40% year over year to 151 sales for February .
Mike Forsum: We believe this is a testament to underlying strength of our industry that John alluded to earlier, as well as results of our affordable product focus and the appeal of our high-performance homes.
We believe this is a testament to underlying strength of our industry that John alluded to earlier as well as results of our affordable product focus and the appeal of our high performance homes.
Mike Forsum: To highlight a few of the successes of our divisions, California finished the year with 600 deliveries at an average sales price of over $890,000 and started 2022 with $226 million in backlog.
To highlight a few of the successes of our divisions. California's finished the year with 600 deliveries at an average sales price of over 890000 and started 2022 with $226 million in backlog.
Mike Forsum: Our California division had an exceptional year delivering growth of 46% in new home orders and 34% in revenues while maintaining an attainable ASP.
Our California Division had an exceptional year delivering growth of 46% and new home orders and 34% and revenues, while maintaining an attainable asps.
Mike Forsum: In Arizona, we delivered 771 homes in 2021, which translated into $276 million in home sales revenue for the year.
In Arizona, we delivered 771 homes in 2021, which translated into $276 million in home sales revenue for the year.
Mike Forsum: This was a decrease from last year, which was a result of the challenging supply chain issues the market experienced and not waning demand. In fact, Arizona continues to be one of the best states for new home construction in the country, given the low levels of existing home supply solid job growth and consistent in migration from other states.
This was a decrease from last year, which was a result of the challenging supply chain issues, the market experience and not waning demand.
In fact, Arizona continues to be one of the best States for new home construction in the country, given the low levels of existing home supply solid job growth and consistent in migration from other states.
Mike Forsum: Thanks to the vintage estate acquisition in May, both Texas and Florida are new markets for us in 2021 and added nicely to both sales and revenue for the year.
Thanks to the vintage of state acquisition in May both Texas, and Florida are new markets for us in 2021 and added nicely to both sales and revenue for the year.
Mike Forsum: We anticipate both of these markets to make greater impact for us in 2022, especially Florida with our Hanover Family Builders acquisition.
We anticipate both of these markets to make greater impact for us in 2022, especially Florida with our Hanover family builders acquisition.
Mike Forsum: As you know, one of our key strategies as a company is to maintain an appropriate supply of land and key markets for future build-out.
As you know one of our key strategies as a company is to maintain an appropriate supply of Atlanta in key markets for future build outs.
Mike Forsum: With the acquisition of Hanover Family Builders, we now have a leading presence in some of the highest growth markets in the country and a more strategically diverse and balanced portfolio of lots across the key states of Florida, Arizona, California, and Texas.
With the acquisition of Hanover family builders, we now have a leading presence in some of the highest growth markets in the country and a more strategically diverse and balanced portfolio of lots across the key states of Florida, Arizona, California, and Texas.
Mike Forsum: At the start of 2021, all of our lots were located in Arizona and California.
At the start of 2021, all of our lots were located in Arizona and California.
Mike Forsum: Thanks to our strategic growth initiatives, 43% of our roughly 13,000 lots are now in Florida and over half are outside of California and Arizona.
Thanks to our strategic growth initiatives, 43% of our roughly 13000 lots are now in Florida and over half are outside of California and Arizona.
Mike Forsum: That makes me excited. What makes me excited is that we finished 2021 with over 4,300 lots owned and controlled in Arizona and almost 2,000 in California. All in all, our strong lot position covers approximately 4.3 years of deliveries at our forward sales projection pace.
That makes me excited what makes me excited is that we finished 2021 with over 4300 lots owned and controlled in Arizona and almost 2000 in California. All in all our strong lot position covers approximately four three years of deliveries at our forward sales projection pace.
Mike Forsum: The strategic balance in our portfolio gives us a great pipeline of lots for future communities and enhances our scale benefits when dealing with local and national suppliers.
The strategic balance in our portfolio gives us a great pipeline of lots for future communities enhances our scale benefits when dealing with local and national suppliers.
Mike Forsum: We remain focused on becoming a major player in the select markets in which we operate, both through organic growth and M&A.
We remain focused on becoming a major player in the select markets in which we operate both through organic growth and M&A.
Mike Forsum: In terms of the supply chain, we continue to be faced with delays and shortages throughout the build process, but I believe the industry, and particularly our company, have gotten smarter about how to navigate the various challenges. This means starting more specs, lowering the number of SKUs, and ordering materials much sooner than normal to account for anticipated delays.
In terms of the supply chain, we continue to be faced with delays and shortages throughout the build process, but I believe the industry and particularly our company have gotten smarter about how to navigate the various challenges. This means starting more specs lowering the number of skus and ordering materials much sooner than normal to account for anticipated delay.
As.
Mike Forsum: while we are not forecasting any improvement in the supply chain conditions within our current guidance.
While we are not forecasting any improvement in the supply chain conditions within our current guidance. One bright spot. We are saying is the availability of labor and the easing of Covid related restrictions in some of our markets. We are hopeful that these favorable trends will continue as the omicron variant subsides.
Mike Forsum: One bright spot we are seeing is the availability of labor, and the easing of COVID-related restrictions in some of our markets. We are hopeful that these favorable trends will continue as the Omicron variant subsides.
Mike Forsum: Now I'd like to turn the call over to Chris, who will provide more detail on our financial results for the fourth quarter and full year 2021, and give some guidance on our expected performance in 2022.
Now I'd like to turn the call over to Chris who will provide more detail on our financial results for the fourth quarter and full year 2021, and give some guidance on our <unk> performance in 2020 to Chris.
Chris Porter: Thanks, Mike. It's great to be part of the team and I'm looking forward to getting to know our investors and analysts more this year.
Thanks, Mike it's great to be part of the team I'm looking forward to getting to know our investors and analysts more this year.
Chris Porter: I will start by providing an overview of our great fourth quarter and full year financial results and then walk through our financial guidance for the first quarter and full year 22 as well.
I will start by providing an overview of our great fourth quarter and full year financial results and then walk through our financial guidance for the first quarter and full year 'twenty two as well.
Chris Porter: To start with, we delivered 260% growth in net income for the fourth quarter versus the same period in 2020 for a total net income of $38.5 million or $0.83 per diluted share.
To start with we delivered 260% growth in net income for the first fourth quarter versus the same period in 2020 for a total net income of $38 5 million or <unk> 83 per diluted share on an adjusted basis net income was $36 9 million or <unk> 79 per diluted share.
Chris Porter: On an adjusted basis, net income was $36.9 million or $0.79 per diluted share. We also delivered a pre-tax margin of 12.4%, a strong 740 basis point improvement from fourth quarter 2020. This is reflecting our expanding gross margin and integration of recent acquisitions.
We also delivered a pretax margin of 12, 4% a strong 740 basis point improvement from fourth quarter 2020. This is reflecting our expanding gross margin and integration of recent acquisitions.
Chris Porter: The strong fourth quarter helped drive our full-year net income to $52.9 million, or $1.14 per share, versus a loss for the full year of 2020. This performance reflects the dedicated team that focused on delivering results while integrating acquisitions and adjusting to being a public company.
The strong fourth quarter helped drive our full year net income to $52 9 million or $1 14 per share versus a loss for the full year of 2020. This performance reflects the dedicated team that focused on delivering results, while integrating acquisitions and adjusting to being a public company.
Chris Porter: Moving on to operations, total revenue for the fourth quarter of 2021 grew to $398.5 million compared to $284.7 million in the fourth quarter of 2020. Revenue benefited from our 29% increase in average selling price of $624,000, partially offset by a decrease in home deliveries to 534 homes.
Moving on to operations total revenue for the fourth quarter of 2021 grew to $398 5 million compared to $284 7 million in the fourth quarter of 2020.
Revenue benefited from our 29% increase in average selling price of 624000, partially offset by a decrease in home deliveries to 534 hubs. The decrease in home deliveries was primarily driven by the construction delays, Mike described earlier, especially within our Arizona Division, partially offset by the increases in volume.
Chris Porter: The decrease in home deliveries was primarily driven by the construction delays Mike described earlier, especially within our Arizona division, partially offset by the increases in volume in California and the addition of Florida and Texas markets through the acquisition of vintage homes earlier this year.
In California, and the addition of Florida, and Texas markets through the acquisition of vintage homes earlier this year.
Chris Porter: For the full year, we crossed the $1 billion mark in revenue, producing a total revenue of $1.02 billion, a remarkable 39% increase over 2020.
For the full year, we crossed the $1 billion Mark in revenue producing a total revenue of $1 $2 billion, a remarkable 39% increase over 2020 Dilip.
Chris Porter: Deliveries for the full year increased 7% for a total of 1,640 homes at an average selling price of $571,000.
Deliveries for the full year increased 7% for a total of 1640 homes at an average selling price of 571000 <unk>.
Chris Porter: California, again, led the way with a 46% increase in the number of homes delivered and a strong $900,000 in average selling price.
California again led the way with a 46% increase in the number of homes delivered and a strong 900000 and average selling price.
Chris Porter: Texas and Florida both added nicely to our total deliveries, partially offset by a decrease in our Arizona division. We expect our Florida division to become a much more meaningful part of our portfolio this year as we enjoy a full year of vintage homes coupled with the addition of the Hanover family builders to our company.
Texas, and Florida, both added nicely to our total deliveries, partially offset by decrease in our Arizona Division, We expect our Florida division become a much more meaningful part of our portfolio. This year as we enjoy a full year of vintage charms coupled with the addition of the Hanover family builders to our company.
Chris Porter: Within our total revenue, we generated $65 million from lot sales and other revenue in the quarter, and $86.9 million for the year.
Within our total revenue, we generated $65 million from lot sales and other revenue in the quarter and $86 9 million for the year.
Chris Porter: The increase in the fourth quarter came primarily from our higher lot sale revenue from our El Cidro master plan community that we acquired at the end of 2020 following a similar strategy that we have deployed successfully in our master plan communities in California.
The increase in the fourth quarter came primarily from our higher lot sale revenue from our LC drove master planned community that we acquired at the end of 2020. Following a similar strategy that we've deployed successfully in our master planned communities in California.
Chris Porter: As we have shared before, the combination of our skills to deliver homes as well as finished lots provide us a competitive advantage in the market and allow us to be opportunistic in maximizing returns and reducing risk.
As we have shared before the combination of our skills to deliver homes as well as finished lots provide us a competitive advantage in the market and allow us to be opportunistic and maximizing returns and reducing risk.
Chris Porter: During the fourth quarter, we generated 440 new home orders with a total dollar value of $313 million on a monthly absorption rate of 4.2.
During the fourth quarter, we generated 440, new home orders with a total dollar value of $313 million on a monthly absorption rate of four point too.
Chris Porter: This compares to 415 homes with a total dollar value of $235 million and a monthly absorption rate of 4.5 sales per active community last year.
This compares to 415 homes with a total dollar value of $235 million and a monthly absorption rate of four five sales per active community last year.
Chris Porter: The year-over-year decline in orders was largely a result of the company's decision to temporarily slow the pace of sales to adjust for lengthening production cycle time.
The year over year decline in orders was largely a result of the company's decision to temporarily slow the pace of sales to adjust for lengthening production cycle times. This this strategic pause was reflected in our full year results as we produced new home orders of 1471 versus 1891 in 2020, but we also enjoyed an increase in our.
Chris Porter: This strategic pause was reflected in our full year results as we produced new home orders of 1,471 versus 1,891 in 2020, but we also enjoyed an increase in our average selling price of these orders growing from 512,000 in 2020 to 655,000 in 2021, reflecting the continued price appreciation and demand in our markets.
Average selling price of these orders growing from 512000 in 2020 to 655000 in 2021, reflecting the continued price appreciation and demand in our markets.
Chris Porter: We ended 2021 with 998 homes in total backlog with a dollar value of $586.2 million at an average sale price of $587,000.
We ended 2021 with 998 homes in total backlog with a dollar value at $586 2 million at an average sale price of 587000.
Chris Porter: This represents a 33% growth in volume and a 51% in total dollars compared to last year.
This represents a 33% growth in volume and a 51% and total dollars compared to last year.
Chris Porter: Gap home sales gross margin expanded to 21.5% in the fourth quarter compared to 15% in the fourth quarter of last year, again reflecting the strong demand market with great price appreciation. For the full year, our Gap
GAAP home sales gross margin expanded to 21, 5% in the fourth quarter compared to 15% in the fourth quarter of last year again, reflecting the strong demand market with great price appreciation for the full year our GAAP.
Chris Porter: home sales gross margin increased 460 basis points to 17.5% on an adjusted basis. Home sales gross margin for the year increased 190 basis points to 22.6% compared to 20.7% in the prior year.
Home sales gross margin increased 460 basis points to 17, 5% on an adjusted basis home sales gross margin for the year increased 190 basis points to 22, 6% compared to 27% in the prior year.
Chris Porter: Turning to the balance sheet, we ended the year with an unusually high cash balance of $346.9 million as we anticipated funding the acquisition of Hanover early in January . During the quarter, we executed on our new $585 million unsecured revolving credit facility, which allowed us to retire all of our existing secured facilities except the one in New York that is anticipated to be paid off earlier this year.
Turning to the balance sheet, we ended the year with an unusually high cash balance of $346 9 million as we anticipated funding the acquisition of Hanover early in January .
The quarter, we executed on our new $585 million unsecured revolving credit facility, which allowed us to retire all of our existing secured facilities, except the one in New York that is anticipated to be paid off earlier this year.
Chris Porter: This new revolver was key to helping us reduce costs and giving us greater flexibility for cash generation.
This new revolver with key to helping us reduce costs and giving us greater flexibility for cash generation.
Chris Porter: This left us with a total debt of $461.1 million at the end of the year and net debt of only $114.2 million. Our ratio of debt to capital at the end of the year was 42.6%, a slight increase compared to third quarter as we drew on our revolver to fund the Hanover acquisition.
This left us with total debt of $461 1 million at the end of the year and net debt of only $114 2 million a ratio of debt to capital at the end of the year was 42, 6% a slight increase compared to third quarter as we drew on our revolver to fund the Hanover acquisition.
Chris Porter: Net debt to net book capitalization ratio was 15.5% compared to 21.3% last year.
Net debt to net book capitalization ratio was 15, 5% compared to 21, 3% last year.
Chris Porter: In January this year, we funded the Hanover acquisition with cash on hand and $22 million on our revolver, leaving approximately $120 million in cash post-acquisition.
In January this year, we funded the Hanover acquisition with cash on hand, and $22 million on our revolver, leaving approximately $120 million.
Cash post acquisition.
Chris Porter: Following the acquisition, our debt to total capital remained constant with year-end at 43% and our net debt to net capital was approximately 33%.
Following the acquisition our debt to total capital remains constant with year end at 43% and our net debt to net capital was approximately 33%.
Speaker Change: Now I would like to provide some guidance for the first quarter and full year of 2022.
Now I would like to provide some guidance for the first quarter and full year of 2022.
Speaker Change: For the first quarter, we anticipate new home deliveries to be in the range of 490 to 520 units and delivery ASPs to be in the range of $460,000 to $470,000.
For the first quarter, we anticipate new home deliveries to be in the range of 490 to 520 units and delivery asps to be in the range of $460000 to $470000. Although we are still finalizing our purchase price accounting respect to the Hanover acquisition on a land sea Standalone basis, we anticipate.
Speaker Change: Although we are still finalizing our purchase price accounting with respect to the Hanover acquisition, on a land-sea standalone basis, we anticipate our home sales gross margin to continue to expand and be approximately 19% to 21% on a gap basis.
Our home sales gross margin to continue to expand and be approximately 19% to 21% on a GAAP basis.
Speaker Change: For the full year 2022, we anticipate new home deliveries to be in the range of 2,700 to 2,900 units, delivery ASPs to be in the range of $500,000 to $515,000, and home sales gross margins to be in the range of 20 to 22% on a gap basis, or 22 to 24% on an adjusted basis. Now I'll turn the call back over to John for some closing remarks.
For the full year of 2022, we anticipate new home deliveries to be in the range of 2700 2900 units delivering ASB has to be in the range of 500000 to $515000 and home sales gross margins to be in the range of 20% to 22% on a GAAP basis or 22% to 24% on an <unk>.
Adjusted basis, now I'll turn the call back over to John for some closing remarks.
Thanks, Chris.
John Ho: We have a lot to be proud of in terms of our performance in the fourth quarter and full year 2021, as we generated significant profits from our home building operations and continue to set the stage for future growth for our company.
A lot to be proud of in terms of our performance in the fourth quarter and full year 2021, as we generated significant profits from our homebuilding operations and continue to set the stage for future growth for our company major.
John Ho: Major part of that growth will be fueled by our acquisition of Hanover Family Builders, which closed in January of this year, and provides immediate benefits to our top and bottom line projections.
A major part of that growth will be fueled by our acquisition of him Handlebar family builders, which closed in January of this year provides immediate benefits to our top and bottom line projections, we have a great strategy in place to capitalize on what we believe will be a long runway of growth in new home construction, particularly in the markets in which we build and product segments in which we are.
John Ho: We have a great strategy in place to capitalize on what we believe will be a long runway of growth in new home construction, particularly in the markets in which we build and product segments in which we operate.
Alright.
John Ho: Given this positive fundamental outlook, the strength of our balance sheet, and the significant discount to book value our shares currently trade at, we believe Lansky presents a compelling investment opportunity. Our board agrees with this assessment and recently authorized a $10 million share repurchase plan which we anticipate putting to use over the course of this year.
Given this positive fundamental outlook the strength of our balance sheet and a significant discount to book value. Our shares currently trade at we believe Lance he presents a compelling investment opportunity.
Board agrees with this assessment and recently authorized a $10 million share repurchase plan, which we anticipate putting to use over the course of this year.
John Ho: Finally, I'd like to thank the entire Lansing team for an excellent 2021 and a great start to 2022. This is a challenging home building market in which to operate and one that takes the coordinated efforts of the entire organization. I am very appreciative of your efforts and look forward to sharing in our future success. That concludes our prepared remarks and now we'd like to open the call up for questions.
Finally, I would like to thank the entire land sea team for an excellent 2021 that great start to 2022. This is a challenging homebuilding market in which to operate and one that takes the coordinated efforts of the entire organization.
I am very appreciative of your efforts and look forward to sharing our future success.
That concludes our prepared remarks, and now we'd like to open the call up for <unk>.
Questions.
Speaker Change: Thank you. Ladies and gentlemen, as a reminder to ask the question, you need to press star then one on your telephone. To withdraw your question, press the pound key. Again, that's star one to ask the question.
Thank you.
Ladies and gentlemen, as a reminder to ask a question you will need to press Star then one on your telephone to withdraw your question press the pound key.
Again, Thats star one to ask a question. Please standby, while we compile the Q&A roster.
Okay.
Speaker Change: Our first question comes from the line of Matthew Booley with Barcalaids. Your line is open.
Our first question comes from the line of Matthew Bouley with block Kelly Your line is open.
Yeah.
Speaker Change: Hey, good morning. This is actually Ashley Kim on for Matt today. So I guess just first question, have you done any kind of backlog stress tests, just in light of the recent move in rates?
Hey, Good morning, this is actually Ashley Kim on for Matt today.
So I guess just first question have you done any kind of backlog stress test just in light of the recent move in rates and maybe how many of the <unk>.
Ashley Kim: maybe how many of the buyers in backlog could potentially fall out if they can't get the financing that they need.
Buyers in backlog could potentially fall out.
You'll get the financing that they need.
Hey, Ashley I think we have and I think Mike our President and C. O L can best address that.
Speaker Change: Hi, Ashley. The answer to the question is yes, absolutely. We actually do it on a monthly basis, and even when we're qualifying a potential prospect as they come through our sales process, we actually
The answer to your question is yes, absolutely we actually do it on a monthly basis.
And even when we're qualifying a potential <unk>.
<unk> as they come through our sales process, we actually start them off at a higher qualifying rate than the actual programs that were offering. So currently we have the highest level of confidence.
Within our backlog that we have today that it can sustain.
Some some meaningful rate increases going forward without any disruption or cancellation to those prospects.
Exactly.
Speaker Change: Thanks for that. And then just on that buyback authorization, how are you kind of thinking about the balance?
Thanks for that and then just on that buyback authorization. How are you kind of thinking about the balance between buying more land for future growth.
Speaker Change: you know, buying more land for future growth, the M&A strategy as well, and then, you know, kind of balancing that with share repurchases going forward. Sure. This is John . I'll address that. I think... Okay.
On the M&A strategy as well and then kind of balancing that with with share repurchases going forward.
Sure. This is John I'll address that.
I think.
It's a good part of our capital allocation strategy shortly after our one year.
As a public company.
Sure Insignificantly ground.
Over the past year.
Look towards 2022.
And we seek to continue to expand in the current markets, though we are currently in right now.
Not taking away from that growth.
And land acquisitions and also our M&A activity, we do think that.
Using some of our capital that we've generated because of our.
Better control flexibility under our new revolving credit facility. It is appropriate to allocate a certain amount of capital.
Certainly at our stock price at such a discounted values, which we think is a.
<unk> opportunity for us to put some of that capital to work so.
We think it's part of our capital allocation strategy and will continue to be a part of that strategy going forward.
But it doesn't take away from how we think about continuing to be a fast growing homebuilder in the markets that we operate in.
Great. Thank you thanks for the color and then I'll leave it there.
Thanks, Josh.
Thank you.
Speaker Change: Our next question comes from the line of Alex Reigiel with B Raleigh, your line is open.
Our next question comes from the line of Alex Rygiel with B Riley Your line is open.
Alex Reigiel: Thank you, John and Mike. Fantastic year. Congratulations on that.
Thank you John and Mike Fantastic year, Congratulations on that a couple of quick questions here first.
Speaker Change: a couple of quick questions here. First, as it relates to Hanover, Hanover's obviously an important catalyst to growth this year. So can you talk a little bit more about maybe year-to-date so far, what you've seen inside Hanover? And you also referenced a pipeline of lots at Hanover at attractable prices. So maybe you could comment on exactly what you mean by that. Yeah, thanks, Alex. I'll address it real quick and I'll hand it over to Mike in terms of,
As it relates to Hanover, Hanover is obviously, an important catalyst to growth this year.
So can you talk a little bit more about maybe year to date, so far what you've seen inside Hanover.
You also referenced a pipeline of lots at Hanover at attractive prices.
So maybe you could comment on exactly what you mean by that.
Yeah. Thanks, Alex.
I'll address that real quick and I'll hand, it over to Mike in terms of.
The contribution of that business, but you know for us as we've talked about over the year.
On previous calls.
2021 was a important year for us to expand into the markets of Texas, and Florida and very similar to how we approach some of these new markets, it's about getting to scale.
Quickly in those markets and M&A is an important part of that and additional organic land acquisition.
Similar to the strategy, where we are.
Entered the Phoenix market and both through organic and choose some bolt on M&A that quickly.
Hum.
Propelled us to become one of the top homebuilders in that market gives us that scale that we need to have the purchasing power that we need to run a successful business I think we're just continuing to play that strategy execute that strategy in the Florida and particularly central.
Florida market with the vintage in Hanover family acquisitions, So, Florida this year as.
As we look at it is actually going to be one of the most meaningful market if not the top market for us going.
Going into 2022.
Which is a very exciting for us given as you know all of the growth.
Growth prospects of demographics, and then just the imbalance in terms of demand and supply in that Orlando market.
But as it relates to how that's helped US just the first couple of months here and then overall.
I want to address that.
Yes.
Hi, Alex Hey, Thanks for the compliment and we appreciate that.
As far as Hanover family builders go I can say that we are.
Speaker Change: Absolutely thrilled with the start of our relationship It seems to be showing all the attributes that we were hopeful during our underwriting and coming out of the gates
Totally thrilled with the start of our relationship.
It seems to be showing all the attributes that we were hopeful during our underwriting and coming out of the gates.
They are performing at a very high level.
We believe that it will continue as we go through the year as that market remains incredibly strong.
Speaker Change: As well, I believe that your question was around the uniqueness of this acquisition by way of their controlling of lots through the land.
Well I believe that your question was around.
So this acquisition by way of there.
Controlling a lot through the lens of the Hanover family.
And company, which we inherited the options through the acquisitions.
Speaker Change: great way to manage our balance sheet in the growth in that market by just getting just-in-time lot delivery through that entity that we now control.
It's a great way to Ah.
Manage our balance sheet and the growth in that market.
Just getting just in time lot delivery through that entity that we now control.
Through those options and contracts. So it's again, a great Testament to the organization that we acquired that's made them a high performing super capital efficient homebuilder in that Central Florida market and now that we're lucky recipient of the great work that they did in establishing that foundation.
Speaker Change: So it's, again, a great testament to the organization that we acquired that's made them a high performing, super capital efficient home builder in that central Florida market. And now that we're the lucky recipients of the great work that they did and established.
Before we got there so.
We're really happy I guess, that's what I want to say.
Yeah.
Speaker Change: And then my next question is related to New York. Obviously, you've been working to exit New York for some time now, but it appears that a huge upside, positive surprise is the sales pace going on at Farina.
And then my next question.
Is related to New York, obviously, you've been working to exit New York for some time now.
It appears that a huge upside positive surprises sales pace going on that for arena.
Speaker Change: So I was wondering if you could comment on that and then also help us to better understand.
So I was wondering if you could comment on that and then also help us to better understand.
Speaker Change: The timing and maybe even quantified cash flow that could be pulled out of that market that will benefit the balance sheet over time.
The timing and maybe even quantify cash flow.
That could be pulled out of that market.
It will benefit the balance sheet over time.
Alex I'll address it from a cash flow perspective, and then I'll turn it to Mike in terms of how the market and sales of bullishness there.
So when we started the year in 2020, we really had two assets in New York.
One called up more on the New Jersey Gulf Coast, and then for Arena.
On 14th.
Oh boy we're completely.
So I think we have a couple of units to deliver so we've actually returned.
Yeah.
Significant amount of that capital already back to the balance sheet.
And what we have left now is just for now and our capital our equity commitment. There is about I would say approximately $30 million.
And as we look to.
We also expect to deliver that.
We're building this year and be able to return all of that capital back to our balance sheet. This year.
At which time, we will be out of New York.
We will redeploy that capital into our horizontal single family homebuilding business.
Speaker Change: Great. In a nutshell, Alex, I would say that New York residential real estate is back, both rental and for sale.
Great.
So Alex I would say that New York residential real estate is back both rental and for sale, particularly pricing below 3000, a foot or power band pricing at Purina is around $2500. A foot. So we are really taking advantage of those tail winds that are coming through the resurgence of this mark.
Speaker Change: around $2,500 a foot. So we are really taking advantage of those tailwinds that are coming through the research.
And perino has really as I said very well positioned for that so today out of the 50 units that we have for sale 37 have been sold and we're looking forward to our first closings in that building coming up here relatively shortly.
Speaker Change: today out of the 50 units that we have for sale, 37 have been sold and we're looking forward to our first closings in that building coming up.
As we complete the building and the retail downstairs.
Speaker Change: What's great about it is that we have sold units throughout the building.
What's great about it is that we have sold units throughout the building, which is really a positive thing at or above our underwriting numbers. When we started this project a couple of years back. So we are not.
Speaker Change: really a positive thing at or above our underwriting numbers when we started this project.
Speaker Change: back so we are not getting the absorption by way of discounting and working our way through so it's a testament
Getting the absorption by way of discounting and working our way through so it's a testament to our well plan building a great floor plans great location in Manhattan, and then the pricing that's really sticking for US right now so we're very happy.
Speaker Change: a well-planned building, great floor plans, great location in Manhattan, and then the pricing that's really sticking for us right now.
This is turning out.
Speaker Change: And Mike, one last question. You mentioned, obviously, that in the last six to nine months, you were piecing sales, given sort of the market dynamic.
And Mike one last question.
You mentioned, obviously that last six to nine months your PC sales given sort of the market dynamics and your ability to.
Mike Forsum: the ability to get building materials and whatnot. Can you update us on how many communities you're currently pacing sales in or something of that nature? And then also give us a little bit more color on
Get building materials and whatnot.
Can you update us on.
How many communities are currently pacing sales in or something of that nature, and then also give us a little bit more color on.
<unk>.
Mike Forsum: on your specs. You mentioned that you're starting more specs, so how does that work into the business plan?
On your specs you mentioned that you were starting more specs. So how does that work into the business plan this year sure.
Mike Forsum: In some degree, everywhere, Alex, we are.
Some degree everywhere, Alex we are.
Mike Forsum: allocating out new sales releases as we're going forward at all of our communities throughout the country. It is not sort of a generalized approach that I've grown up with in the industry.
Strategically allocating out new sales releases as we're going forward at all of our communities throughout the country. It is not sort of a generalized approach that.
I've grown up with in the industry. So.
Being more specific each community has its.
Specific uniqueness in.
Mike Forsum: In California, particularly out in the Inland Empire, we are using best and final still with our releases that come through.
In California, particularly out in the inland Empire, we are using best and final still with our releases that come through and we have been hugely successful.
Mike Forsum: Optimizing our sales pricing there by way of that process our team has become excellent at really
Optimizing.
Our sales pricing there by way of that process. Our team has become excellent and really executing that without alienating, our homebuyers and creating a frenzy that frankly is not very healthy for the long term as they become land sea family.
Mike Forsum: But that being said in Arizona We are deploying more of a smaller release process normally if we would have a sales release
But that being said in Arizona.
We are deploying more of a smaller release process normally what we would have a sales release of eight to 10, maybe 10 to 12.
Mike Forsum: 12, we're still around 3 to 4, and then coming back, repricing, and going back out to the market again.
We're still around three to four and then coming back repricing and going back out to the market again in a.
More frequent way, but that's the way to do it.
Mike Forsum: Florida, pretty much the same in terms of pricing that's around tighter releases, that's giving us an opportunity to grab more of
Florida.
Pretty much the same in terms of pricing that's round tighter releases, that's giving us an opportunity to grab more of the appreciation that's coming through.
In the general competitive areas in which they're operating.
Mike Forsum: So that's kinda how we're going about doing it. Northern California remains really strong too. We do have a best and final going on out in the Tracy market with our community, Ellis.
That's kind of how we're going about doing it northern California remains really strong too we do have a best and final going on out in the Tracy market with their community Ellis.
They've taken a lot of what we've learned in southern California, we're applying it up.
In that market and then in the Bay area.
Mike Forsum: Because the way that the building configuration were a little more high density there. We don't really get quite that opportunity but they're doing a great job on.
The way that the building configuration, where it a little more high density there.
Really get quite that opportunity, but they're doing a great job on shrinking the releases in the building units themselves in the units.
Again trying to maximize the opportunity to grab a hold of the price appreciation.
Mike Forsum: On the spec side of your question, really, some of that is a response to just getting from sale to start as, you know,
On the spec side of your question.
Really some of that as a response to just.
Getting from sale to start as we talk about is getting permits done and through the cities, which is a big bottleneck getting better but it's also been a challenge.
Mike Forsum: So in some respects, specs are a result of just trying to anticipate delays through the government agencies that are permitting the starts of rehouses.
So in some respects specs are a result of just trying to anticipate delays through the government agencies that are permitting the starts of warehouses and then they work with and quickly sold through our release process that I just talked to you about but definitely we are deploying more spec starts as.
Mike Forsum: But definitely we are deploying more specs start.
Mike Forsum: whole with the idea of trying to get out in front of our production cycle process that's been somewhat elongated here.
As a whole.
With the idea of trying to get out in front of our production cycle process thats been somewhat elongated here due to all the challenges we've talked about before.
Mike Forsum: about before, but for the first time ever, we went around and we have the ability to analyze this.
But for the first time.
Ever.
We went around and we have the ability to analyze and so that I think that we have less than a handful of I don't even know it's less than a handful standing specs throughout the entire company.
And that's almost unheard of I mean, there's literally.
Mike Forsum: uh... no inventory that's available for a media
No inventory that's available for immediate move in any of our communities today, so that idea of specs standing out there standing specs for quick move ins.
Mike Forsum: in any of our communities today. So that idea of specs standing out there or standing specs.
Mike Forsum: really real on the ground because we quickly sell the houses once we put them out to market.
Not really real on the ground because we quickly sell the houses once we put them out to market and the catch up the production cycle.
Sounds great. Thank you.
Thank you.
Speaker Change: As a reminder, ladies and gentlemen, that's star one to ask the question.
As a reminder, ladies and gentlemen that star one to ask the question.
Okay.
Speaker Change: I'm showing no further questions in the queue. I would now like to turn the call back over to John Holt for closing remarks.
I'm showing no further questions in the queue I would now like to turn the call back over to John <unk> for closing remarks.
Thank you everyone.
Look forward to speaking with you on our next earnings call that'll be coming up shortly here.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
John Holt: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
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