Q4 2022 Beazer Homes USA Inc Earnings Call

Thank you all for attending today's conference will begin shortly to allow for additional participants to join again. Thank you all for standing by today's conference will begin shortly.

[music].

[music].

Thanks.

Good afternoon, and welcome to the Beazer homes earnings conference call for the quarter and fiscal year ended September 30th 2022 today.

Today's call is being recorded and a replay will be available on the company's website. Later today. In addition, Powerpoint slides intended to accompany this call are available in the Investor Relations section of the company's website at Www Dot Beazer Dot com at this point I will turn the call over to David Goldberg, Senior Vice President and Chief financial.

Officers.

Thank you good.

Good afternoon, and welcome to the Beazer homes conference call discussing our results for the fourth quarter and full year of fiscal 2002.

Before we begin you should be aware that during this call we will be making forward looking statements such statements involve known and unknown risks uncertainties and other factors described in our SEC filings, which may cause actual results to differ materially from our projections.

Any forward looking statements speaks only as of the date. The statement is made we do not undertake any obligation to update or revise any forward looking statement, whether as a result of new information future events or otherwise.

New factors emerge from time to time and it is simply not possible to predict all such factors.

Joining me is Allan Merrill, our chairman and Chief Executive Officer.

On our call today, Alan will discuss highlights of our fiscal 'twenty two performance our thoughts on the current macroeconomic environment.

Fiscal 'twenty, three operational initiatives and our competitive strategy.

I will then provide details of our full year results our expectations for the first quarter and some additional operating priorities for the year.

I'll conclude with a wrap up by Allan after our prepared remarks, we will take questions in the time remaining I'll now turn the call over to analyst.

Thank you, Dave and thank you for joining us on our call. This afternoon.

We finished fiscal 'twenty, two with strong financial results, even as the environment for new home sales was under extraordinary pressure.

During the course of the year, our team successfully navigated complex challenges with both customers and trade partners, which allowed us to generate historically strong financial results and exceed the strategic objectives, we established at the beginning of the year.

We grew EBITDA by nearly 41% leading to more than $7 and earnings per share.

We generated an average return on equity of 26, 5% or 34%, excluding our deferred tax assets.

We reached our long standing leverage goals by reducing debt below $1 billion and we increased our active lot position by almost 14% primarily by securing option lots.

Despite a fundamental shift in the environment for new home sales during the year. We did what we said we were going to do and then some.

While it is clear to all of us that the magnitude of our financial results in fiscal 'twenty. Two we're greatly aided by the enthusiasm for housing that developed during the Covid crisis. It is also clear that our results were directionally consistent.

With our performance over the past decade.

As you can see on this slide our long standing balanced growth strategy has allowed us to dramatically improve profitability without growing our assets and at the same time reduce leverage and enhance the efficiency of our balance sheet.

Balanced growth has also created tremendous value for our shareholders.

We've been able to improve both the quantity and composition of our book value, which positions us to be more resilient and opportunistic in the face of significant challenges.

Over the past few years, we've consistently identified declining affordability as the greatest risk to our industry.

In recent quarters, we've shown the graphic on this slide to illustrate the concern.

As the Covid pandemic played out rising demand for new homes, and a constrained supply chain led to rapidly increasing home prices and rents.

At the same time inflation in other parts of the economy proved to be persistent which as we all know has led to much higher interest rates.

With 30 year mortgages now about 7% affordability isn't a risk. It is the explanation for one of the sharpest drops in demand we've ever experienced this is already pushed down both new and used home prices and we anticipate continued weakness in both demand and pricing in the quarters ahead.

It's tough as this environment is right now a positive longer term thesis for housing and homeownership remains firmly in place we've under built the country's demographic growth for a decade, resulting in a multimillion home deficit employment.

Conditions remained strong with work from home entrenched in many of the fastest growing industries.

And unlike the last serious housing downturn, the credit quality of the existing mortgage book is unlikely to contribute a wave of short sales or foreclosures to the housing supply.

That's why we're confident that affordability will recover over time as prices wages and interest rates find a new equilibrium.

Entering fiscal 'twenty three we're not waiting on a recovery, we're proactively addressing the weak demand environment like other builders, we're adjusting prices incentives and specification levels to enhance buyer affordability.

Additionally, we're working on two other initiatives that should offset some of the pricing pressure we are facing.

We expect to reduce our construction costs.

Comparing our most recent quarter to fiscal 19, our average sales price increased by more than $130000, allowing gross profit to increase by nearly $60000.

That means our costs went up $70000. The vast majority of which is related to vertical construction.

We are intensely focused on recapturing those dollars.

With lumber prices back to pre Covid levels, we're already seeing reductions in the cost of our framing packages.

We're now realizing about $15000 in lumber savings on new starts which will benefit future closings beyond lumber, we're targeting significant savings across our other direct cost categories.

Second we expect to reduce our construction cycle time.

Prior to Covid, we were generally able to start homes as late as April and still close them before fiscal year end over.

Over the last two years construction cycle times have extended by about 120 days, meaning that last year. Our construction cutoff dates were generally in January .

Dramatic reductions in housing starts are beginning to release some of the pressure on the supply chain. That's why we're targeting at least an additional months of sales and closings in our current fiscal year.

While affordability and availability are crucial elements in selling new homes, and a challenging environment, they're not the only things that matter.

The experience, we provide and the home we build also matter.

That's why we're vigorously emphasizing to strategies that differentiate us from our competitors.

First mortgage choice is an exceptional competitive advantage maury.

Mortgage choices designed to ensure that a carefully selected group of lenders competes for our buyers business.

Means our customers have access to an array of loan programs rate locks buy downs that are typical in house lender simply can't match.

Second our homes surprising performance and the monthly savings it creates resonates with buyers.

Our homes are built to energy efficiency standards that exceed current energy codes for new construction and are light years ahead of used homes.

That means our homes cost less to operate and are more likely to retain value against the energy efficient homes that will inevitably be built in the future.

With monthly cost of ownership and resale value at the centre of most buyer conversations our commitment to energy efficiency is a big advantage.

We know that fiscal 'twenty three is going to be intensely challenging, but we also know that we're positioned to emerge from this environment and strong shape.

It's not just that our corporate and operating management teams are battle tested from the last downturn, we're a fundamentally different company.

We've got a sizable and efficiently controlled land position, we've massively reduced debt and interest expense and perhaps most importantly, we've developed durable competitive strategies to compete for buyers.

With that I'll turn the call over to Dave.

Thanks Alan.

For the full fiscal year, adjusted EBITDA was $370 million up nearly 41% versus the prior year.

Net income was $221 million or $7 17 of earnings per share inclusive of $12 million of energy efficiency tax credits.

Our average community sales pace was two eight per month with a cancellation rate of 18%.

Homebuilding revenue was $2 3 billion up about 8% as the benefit from higher Asps offset a modest decline in closings.

Gross margin, excluding amortized interest impairments and abandonments was up 330 basis points to 26, 3%.

SG&A as a percentage of total revenue was down 50 basis points to 10, 9% as we benefited from improved leverage from higher Asps.

Interest amortized as a percentage of homebuilding revenue was three 1% down 100 basis points as we benefited from lower interest incurred.

And our GAAP tax expense was about $53 million for an effective tax rate of 19, 4%.

As a reminder, broadly speaking we don't pay cash taxes as we continue to utilize our deferred tax assets.

As it relates to our balance sheet, our liquidity at the end of the year stood at more than $450 million comprised of unrestricted cash and an undrawn revolver.

As Alan mentioned in his opening comments, we achieved our goal of bringing debt below $1 billion. We ended the fourth quarter at about $900 million $980 million of debt and we now have no maturities due until March 2025.

Our net debt to cap was 45% and our net debt to EBITDA was two one times in line with our expectations and.

And finally after the end of the quarter, we replaced our secured revolver with a larger unsecured facility, which completely eliminate secured debt from our capital structure.

As it relates to land spend we're taking a more cautious approach until we see conditions stabilize we continue to re underwrite all of our land deals and in many cases renegotiate both the cost and structure of the deal.

These efforts will likely continue to yield modest abandonment charges as we walk away from deals that don't meet our underwriting criteria criteria in a higher rate and lower price environment.

Even with a more cautious approach to new investment we have a robust land pipeline in place with more than 24000 active lots a majority of which are controlled through options.

Although conditions are likely to remain challenging in the near term our land position enables modest community count growth in fiscal 'twenty three accelerating in fiscal 'twenty for allowing us to be very disciplined in the current environment.

Moving back to the near term, we're providing the following expectations for the first quarter of this fiscal year.

We expect average monthly sales pace to be less than two per community, reflecting both normal seasonal trends as well as the weakness we're experiencing in the current rate environment cancer.

Cancellation rates are unlikely to improve contributing to the expectation for lower net sales.

We anticipate backlog conversion to be up 400 to 450 basis points versus the same period last year as cycle times continue to normalize from all time highs.

Asps should be about $535000 we.

We expect gross margin to be down 150 to 200 basis points versus the same period last year.

SG&A on an absolute dollar basis should be up approximately $4 million most of which is related to employee cost of living increases from the past year.

This should lead to EBITDA between 45 and $50 million for the quarter.

Interest amortized as a percentage of homebuilding revenue should be in the mid threes and our tax rate to be approximately 17%.

In addition to the cost reduction and cycle time initiatives that Alan discussed earlier there are several other operational disciplines. We are following as we continue to execute our balanced growth strategy.

First we will keep our production aligned with sales maintaining a healthy balance of spec and to be built production as individual market conditions dictate.

Second we will keep our organizational structure aligned with the volume of our business, while allowing for future growth when demand returns and.

And third we will remain cautious with our capital allocation balancing opportunities for growth with expanding liquidity.

As we enter fiscal 'twenty three our posture is cautious we will respond as the market develops and won't sacrifice the progress we've made with our balanced growth strategy.

With that I'll turn the call back over to Alan Thanks again, Dave.

<unk>.

Our fiscal 'twenty two was very successful, but also very unusual.

After beginning the year with demand for new homes at feverish levels, which we couldn't fully accommodate due to supply chain challenges we ended the year.

In a decidedly weak sales environment brought about by an unprecedented increase in rates.

Despite this shift we were able to generate excellent financial results and improve our balance sheet in fiscal 'twenty two.

Taking a step back our team has done an outstanding job of executing our balanced growth strategy over many years, they've allowed us to improve both the operations and the financial position of the company, which should help us to withstand what we know will be a challenging environment in fiscal 'twenty three.

The long term fundamentals for housing remain intact and robust and our team is why I remain confident that we have the people the strategy and the resources to create durable value over the coming years with that I'll turn the call over to the operator to take us into Q&A.

Thank you to ask a question. Please on mute your phone press star one and when prompted clearly record your first and last name fully and clearly so I may introduce you.

To withdraw your question. Please press star two.

Again to ask a question press star one.

Our first question comes from Alan Ratner.

No go ahead.

Hey, guys. Good afternoon, thanks for taking the question and a nice performance in a tough environment here.

I'd love to Alan just digging a little bit in terms of your pricing strategy. So it's a little bit tricky to figure out what's going on here just looking at the guidance and the results speak us.

On one hand, you are for you.

<unk> margin guide is about 600 basis points lower than the near term peak two quarters ago, which is generally consistent I think with what most of your peers are seeing but.

It looks like your price expectation at least for next quarter is up pretty significantly quarter over quarter and it Hasnt peaked yet so.

I'm guessing that's a function of just you know kind of homes that were sold maybe before the more recent slowdown but.

What exactly is kind of a net price reduction that you guys are seeing right now and how is that filtering through to your to your numbers here is it more on the incentive side with with rate buy downs and things like that or is it is it mix impacted anything any color you can give there would be helpful.

It's a.

Complicated question.

And in intelligent one Alan but it is a hard one to answer to because there are a lot of moving parts.

Pull it apart.

We.

I'm pretty confident I don't know for sure, but I'm pretty confident Q1 will end up being peak asps for us in in fiscal 'twenty, three and I think it's for the reasons you mentioned that is backlog that we're delivering in the December quarter that was sold.

Up to 12 months ago nine months ago seven months ago. There's also some mix element.

Embedded in that.

And those homes would've had some incentives mixed in but not a lot.

As we think about going forward.

We've really identified markets into two categories and this is an oversimplification, but it might help explain.

Explain why it's hard to figure out exactly what's going on in the numbers.

There are markets that have traditionally operated in what I call markup to mark down which.

Which is to say that they really that the markets are characterized by a fairly aggressive level of incentive dialogue 30000 40000.

But you don't really see base price moves in that environment and you've got other markets, where just traditionally it's kind of an everyday low price.

And there's kind of a cut to the chase and give me the base price and the thing Thats tricky honestly is that markets don't they're not permanently in one or the other category and in fact, what ends up happening typically in the in the markets that have large incentives at some point the incentives are large enough that there is a release.

Pressure that has built up in the base price drops, but then the incentives dramatically.

Reduced as well so as I as I think about our pricing strategy, it's less about kind of a national perspective, and it's more about what are we doing in Dallas what are we doing in California. What are we doing in the east coast and look the bottom line is based prices are coming down and or incentives are going up.

But you know as well as anybody who listens to this call what's happening in a national context isn't that.

It's meaningful but it isn't as meaningful as whats happening in that neighborhood and what competitors are doing.

So I think we're going to see a asps come down over the course of 2023 and I think we will have margin pressures through 2023, but I think we're going to be some offsets on the incentive and pricing side, because I am really confident we can go get more than just lumber savings into the direct costs.

And I I wish there was a simpler fewer words you know.

Yes, or no kind of answer to your question, but those are some of the components.

That I think may help understand whats happening in our business.

Yeah, No that's really helpful. Alan and I appreciate there's at least kind of just talking through the progression of price in 'twenty. Three I think I think kind of answers at least a good chunk of that question there.

Secondly, I'd love to drilling a little bit on the cancellations you know, obviously oh no. It's.

It's not unique to you guys, but.

Cancellations are accelerating and.

Can you talk a little bit about the main drivers of those cancellations what stages are those cancellations occurring and are you losing people at the closing table because youre not maybe as aggressive an unwilling to incentivize those buyers or are these people that were only in backlog for a month any any color you can give there to better understand what's causing the cancellation.

And at what stage they are occurring and then I guess the final point on that is what the success rate looks like in reselling those cancellations.

Okay. So one sort of overarching comment about cancellations and I have to make this comment it's a bit redundant.

But our cancellation rate consistently has included lot transfers, so somebody moving within a community to a different home.

It doesn't affect that net sales, but if they've moved from lot sixth a lot eight that's a new sale and a new can and I only point that out because I want to be careful as anyone looks at our can rate and compares it to anybody else's can rates I don't know what their math is and what they include or exclude Zoe we tend to be very focused on the trajectory within our own business because we.

We know that it's comparable.

Calculation, so with that out of the way I would tell you that there really are two things that are happening in cancellations either people chose to not lock.

And they find rates that either they can't or they don't want to afford.

Or.

In a few of our cities and it really isn't in most of our cities, we've seen folks walk away from fairly significant earnest money deposits in order to buy a home that is ready right now before their home with us is ready.

At a giant discount.

And I think that there is definitely a dynamic around fiscal year ends in the industry between September and December where if you're sitting on finished specs and we see it every year maybe more so this year than many youre, saying giant incentives on those ready to move in homes as opposed to one on to be built homes and we've lost some of our buyers there.

But.

In terms of at what stage, we're losing them. They they are they are spread there is a pattern where they're all two weeks out from closing where theyre. All two weeks after sale I don't know that I can manufacturer quickly is a statistic that would answer that in a precise way, but it doesn't feel like there is a particular.

The emphasis at the front end or at the back end, but those are the two things folks that we're not locked in on their rate and got to a place where they can't afford it or just say gosh, 7% is a lot and I want to wait.

Or.

There's a $50000 offer an $80000 off and they are walking away from a significant earnest money with us in order to go capture that now you ended the question with you know whether we're being successful or not successful. We are open for business and we are talking to those buyers I think where is it.

We're of the incentive structure that our peers are offering so we tend to not be surprised when that happens and in many instances, we're proactive with backlog if we've done something in pricing in our community, where we see what's happening around us will reach out to the backlog and talk to them about what we can do to.

Make sure that Theyre feeling great about closing.

I don't know with a 30 ish percent can rate in the fourth quarter I want to say it was super successful, but that's certainly the effort that we've got underway and it's been fairly consistent at that level I would tell you from kind of mid summer through present day.

So I haven't really seen it dramatically changed over the last 30 60 days I mean, it wasn't great in July and it hasn't really been great sense.

Alan I would tell you its Dave just to add to that on slide 27 in the presentation. We have spec homes and you can see the level of specs and specifically the level of finished specs still remains very very low so in terms of cancellations pretty high success in being able to resell homes and not not generate a lot more specs from that perspective.

Right, Alright, guys well, thanks, a lot I appreciate all the time.

You bet. Thanks al.

Our next caller is Alex rygiel with B Riley.

Go ahead.

Thank you gentlemen, nice quarter.

Thank you Sir drilling into the 70000 per home cost inflation, it's great to hear you've already sort of recaptured 15000 of lumber savings, but what are some of the other large buckets that you see opportunities to recapture in the near term and maybe if you can quantify that that'd be helpful.

Yeah, I can't because we haven't done it yet.

In terms of the individual categories, but look the big categories, where we're looking at all of the mechanical systems, certainly plumbing and electrical and Mccain and HVAC.

Are categories that we think that there are opportunities and you know our manufacturers no. This not just from us, but from our peers windows and doors, that's another category bricks and other category.

There isn't a single category that is as large as lumber that we're going after so it's more you know I won't call them nickels and dimes, because we're talking about thousands and tens of thousands of dollars, but its individual.

Parts and pieces as opposed to big Juicy categories like lumber.

And then congratulations on achieving your debt reduction targets.

Any chance you could point us in the direction for what a new target might look like for year end fiscal 2023.

Look I think we're pretty comfortable we wanted to get the leverage down below a $1 billion and it's I don't anticipate any increase.

In that but I think we've got a.

Relationship between our equity and our debt now that we're very comfortable with and I expect that just through the ordinary course as we continue to grow book value that that leverage ratio will come down, but I don't think the total level of debt is going to change very much.

Thank you very much.

Alright, Thank you Alex.

And our next caller is Alex Barron with housing Research Center you May go ahead.

Yeah, Thanks, gentlemen, and a great great job this year.

I wanted to focus in on on SG&A I think.

This year you know we saw an improvement in that ratio.

But obviously as things slowed down that also kind of goes the other way. So my question is do you have any.

Thoughts or initiatives to try to I guess.

Not allow that ratio to go up too much this year that you can discuss.

Well Alex the.

It's Dave obviously, we're very very focused on it and you're right look you had a lot of leverage as Asps has gone up in SG&A as apprentices come down we talked about Q1 guidance of SG&A being up about $4 million, primarily from cost of living increases.

You haven't really seen wage pressures ease yet, but if the environment gets weaker we're hopeful we're going to see some of that but look absolutely focused on SG&A looking at overheads looking at our volumes and what were driving as a community as a business excuse me at the community level and being very very focused on making sure that we are that we're watching that carefully and manage that.

To the size of the business.

Okay.

In terms of being able to deleverage further and P&L.

There are plans to slow down or stop land land spend this year to raise cash and keep paying down debt.

Well look we talked about in the script, Alex we're very clearly that there's a level of caution in our land spend this year renegotiating existing deals focusing on liquidity I wouldn't go so far as to say, there's a specific desire as Alan mentioned to pay down debt.

Further below the $1 billion of where we've gotten so far but the idea is to create liquidity in the business and gives yourself a lot of financial flexibility as we look forward to a royalty uncertain 2023, and what we think is going to be better conditions in the future.

I'll just add to that Alex I think you know building a little cash as a good thing to do obviously in an uncertain environment and honestly I look at our fixed income instruments and say they are fairly attractively priced you know no maintenance covenants and low coupons. So I think we want to be a little bit careful I don't think we need to go pay that off as much as being cautious having liquidity is a good thing.

I don't know that structural reductions are the divest intermediate and longer term strategy.

Got it and I don't know if it's here in your presentation I'm, just kind of scrolling through but you guys have a figure for what the starts were in the quarter and what your total homes under construction is whether it's old are not sold.

Well, so I can tell you Alex that starts were down 50% year over year in Q4, and we expect a pretty meaningful decline in Q1, just given the overall environment and given the sales pace and given the focus on units under production. So a pretty significant declination in terms of overall start spaces.

Okay and do you have the overall.

Homes under construction that you guys have that time.

We certainly it's in the K, Alex and you certainly can look at our overall, what's in backlog and spec starts in the K I don't have it right in front of me, but the total the total volume is certainly in the K and disclose in terms of specs and backlog under construction.

Okay, and if I could ask one more.

What's your overall approach at this point you know you guys mentioned about the anecdotal or people walking away canceling because they can find that.

Moving somewhere else at a discounted price I mean are you guys.

Following that same approach of trying to have those specs or are you now in chasing that that type of buyer or not necessarily.

That's not really US you know, we've always had a blend of to be built and spec homes and in an environment, where we had a hard time predicting what our build costs, we're going to be it was difficult to sell to be built and then have your costs get away from you and so we certainly moved more in the direction of <unk>.

<unk> over the last 18 months or two years, but I think things are reverting more to norm for US right now Alex and I think you'll see us back into 60 plus percent to be built a context, we have individual communities townhome communities.

In certain cities, where specs have always been for us a slightly larger share, but we're not intending to go put a bunch of inventory in the air and then try and compete on the size of discounts, we can get to sell them.

Got it Okay gentlemen, best of luck for the year. Thank you.

Okay.

And before we go to the next caller as a reminder, if you would like to ask a question. Please on mute your phone press star one and record your first and last name and slowly and clearly one conference on May introduce you.

Our next caller is Julio Romero with Sidoti you.

You May go ahead.

All right good afternoon, everyone in.

My name is to fund the human this is the fund your onshore Julio Romero, how he goes dawn.

Good how are you.

Good.

I'm, sorry, if I missed this but.

How are you thinking about land spend given the uncertain environment and sorry, if I missed it.

Oh go ahead Dave.

Look we did speak to it our labor, but no worries happy to kind of go through it again I would tell you we're taking a pretty cautious approach to land spend we started to outline this as conditions slowed but frankly renegotiating every deal that we're involved in and trying to find opportunities to restructure.

Rice take downs wherever we can in a deal to make it more attractive. So I would tell you overall the approach, especially with a lack of visibility into the market is cautious.

Waiting to see more stability until until we see more stability in the market.

Thank you so much.

Can you also talk about the variability in our community count could endo, but at the end of fiscal 2020.

I think that there are two there are two things going on there I mean, we've got a great lot position today and I think.

If we could all assume that our absorption rates were going to be similar to or the average of what they've been in normal times. It would be a little easier to make a prediction on that prediction would be our community count will be a little higher at the end of the year.

I think when you overlay.

A very high degree of difficulty in predicting sales paces certainly over the next three to six months.

I think it's harder to know what the community closeouts are going to be.

So I think there'll be modest community count increase over the basis of the year or over the balance of the year.

But the weaker sales are in Q1 and Q2, the higher the community count at least temporarily will be towards the end of the year. So it's kind of a two part answer but those are those are the elements that will make up the ending community count.

Alright, Thank you and on your debt.

Can you tell us on what she's like fixed versus floating and secondly.

Does the move up in like rates impact the interest expense dollars flowing through your cost of sales.

No it doesn't and so in terms of what's fixed versus floating to fixed rate that all of the senior notes are fixed.

The revolver has a floating rate instrument when it's drawn and there's a non usage fee and again at the end of the year, we had nothing drawn on the revolver and then obviously the movement as we talked about from the secured revolver to the unsecured revolver.

And the fully unsecured capital structure.

The secondary sub debt has all of that is true for element in it but it's at a LIBOR base and its really an insignificant it really doesn't matter what happens to rates, it's such a small instrument.

Around $70 million that it doesn't really have any material effect on interest expense in terms of I think the second part of the question was interest amortized through cost of goods sold.

And frankly, it won't really be impacted by rate increases and rate changes. It's much more of a factor of interesting card, which we said is predominantly from fixed rate instruments.

The previously capitalized interest balance which of course is in our K you can take a look and then inventory turnovers. The big the big factor in that so it really won't be a be impacted by higher rates or changes in the treasury or the cypher right.

Thank you so much and the last one for me.

The expectation of lower volumes in fiscal 'twenty, two and three.

How are you guys thinking about setting up fiscal 'twenty, four and beyond slowing of upward earnings trajectory.

Well I think we've got the land position right now, where we expect to exit this year with a slightly larger community count again with the variability around Closeouts and frankly in 'twenty four I think we'll be in a position for an even larger community count.

And I actually think there will be unit activity growth over the next couple of years in our company.

He is very challenging right now we have no misunderstanding about that but the positions that we've secured over the last several years, we're pretty excited about bringing to market and I think there will be as I said in the script there'll be an equilibrium between wage growth that has been accumulating prices being flat and then down and up.

And rates are finding of a more stable environment. It may be at lower levels than in the next year or two.

Combination of those things were pretty optimistic about the ability to grow both community count and home deliveries.

As we look out into 'twenty four.

Thank you guys. So much for taking my questions.

Thank you you're welcome.

And we have no additional questions at this time.

Okay I want to thank everybody for joining us on our call and we look forward to talking to her next in the next few months. Thank you. So much and this concludes today's call.

This concludes today's conference. Thank you for participating you may disconnect at this time.