Q4 2023 Tri Pointe Homes Inc Earnings Call
Yeah.
Greetings and welcome to you try Point's fourth quarter 2023 earnings conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce David Li Investor Relations for Tri Pointe homes. Thank you you may begin.
Good morning, and welcome to Tri Pointe homes earnings Conference call earlier. This morning, the company released its financial results for the fourth quarter of 2023 docks.
Documents detailing these results, including a slide deck are available at www Dot Tri Pointe homes Dot com through the investors link and under the events and presentations tab.
Before the call begins I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating performance are forward looking statements that involve risks and uncertainties.
A discussion of risks and uncertainties and other factors that could cause actual results to differ materially.
Detailed in the company's SEC filings.
Except as required by law the company undertakes no duty to update these forward looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be access to the Tri Pointe website and in its SEC filings.
During the call today are Doug Bauer, the company's Chief Executive Officer, Glen Keeler, the company's Chief Financial Officer.
Tom Mitchell, the company's Chief operating officer, and President and Linda Mamet, The company's Chief marketing officer with that I'll now turn the call over to Doug.
Thank you David and good morning to everyone on today's call.
During the call we will review operating results for the fourth quarter and the full year.
Provide a market update and discuss key operating objectives.
In addition, we will provide our first quarter and full year outlook for 2024.
2023 proved to be another strong year for Tri Pointe homes capped off by a successful fourth quarter.
We reached or exceeded the high end of all of our key operating metrics for the quarter.
Closing out the year with strong momentum.
During the quarter, we delivered 1813 homes.
The average sales price of 685000.
Leading the home sales revenue of $1 2 billion and diluted earnings per share of $1 36.
Our gross margin for the quarter was 22, 9% and our SG&A expense as a percentage of homebuilding revenue was nine 3%.
We also repurchased approximately one 8 million shares of our common stock during the fourth quarter at an average price of $27.23 for an aggregate dollar amount of $50 million.
Despite the macro headwinds of inflation and volatile interest rate swings 2023 was a strong year for our company.
Yes for further success in 2024.
For the full year 2023, and we delivered 5274 homes at an average sales price of 693000.
Leading the home sales revenue of $3 7 billion.
Our homebuilding gross margin was 22, 3% and.
And diluted earnings per share was $3 45.
We ended the year with a book value per share of <unk> $31 52.
A 12% year over year increase.
Fueled by 40% rise in net new home orders in 2023, we increased our opening backlog units by 58% heading into 2024.
In the fourth quarter and 23, there was a significant shift in mortgage interest rates.
Initially, peaking at cycle highs in October.
Subsequently declined as market sentiment shifted.
As rates began descending in November home buying activity increased with December ultimately exhibited the strongest orders in the quarter.
That end of year momentum has been sustained through January and into February and we would characterize the overall demand environment is strong demonstrated by our January absorption rate of 3.5.
In addition, we opened 70 new communities in 2023 and in the year with 155 active selling communities, representing a 14% increase compared to the prior year.
We anticipate that our higher community Count Cup.
Coupled with the ongoing strong demand will help us achieve our projected 17% year over year increase in deliveries in 2024.
Glen will provide more color on our guidance during his remarks.
We remain encouraged about the fundamentals of our business, including household formations.
Strong demand for millennials and Gen Z buyers.
A more normalized supply chain and shorter cycle times.
Well each of these factors contribute to the long term health of our industry.
We are particularly optimistic about the ongoing favorable supply and demand dynamics that structurally support New Hampshire, new home demand.
In addition, the resale market remains locked in as many existing homeowners are holding mortgages far lower than current market rates.
These dynamics should continue to support the homebuilding industry.
With new home market share of total home sales at historical highs.
The strength of our balance sheet continues to be a priority.
We ended 2023 with $1 6 billion in liquidity and a net debt to net capital ratio of 14, 6%.
We generated $195 million of cash flow from operations during 2023.
We remain committed to producing positive cash flow in the future as we balance our growth initiatives, while reducing debt and remaining active in our share repurchase program.
With $869 million of cash on hand at year end. We currently plan to pay off the 450 million of senior notes that are due in June.
By deleveraging, we expect to save $26 million annually in interest costs and reduce our debt to capital ratio by approximately 30%.
In December we announced that our board of directors approved a new $250 million share repurchase authorization, demonstrating our commitment to returning excess capital to shareholders.
For the full year of 2023, we repurchased six 3 million shares at an average price of $27 68.
Represent a total spend of $174 million.
Share repurchases have been a key component of our capital plan over the past several years.
Slide 19 of our slide deck highlights the impact of our share repurchase program since its inception.
From the end of 2015, we have reduced shares outstanding by 41%.
And grown our book value per share by 200%.
That equates to a 15% compounded annual growth rate in our book value per share.
Our goal is to continue to increase book value per share by 10% to 15% annually through a combination of share repurchases and consistently generating strong earnings.
As a growth oriented company, we are focused on growing scale in our existing markets and targeting new markets through organic startups or M&A.
In our existing markets, our west region as close to targeted scale and is generating strong margins and cash flow.
Over the past few years, we have been investing heavily in our central and east regions to grow community count that we are seeing the benefit from that investment.
Over the next two years, we expect delivery volumes in Texas to grow over 60%.
Prior to 2023.
In the Carolinas, we anticipate delivery volume of over 30%.
Delivery volume growth of over 30% in that same period.
Not only will this provide for strong topline growth and increased profitability as our Texas and Carolina divisions are currently producing homebuilding gross margins at or above the company average.
For new market expansions, we recently announced our organic entry into Utah, and we are already seeing positive momentum on the land front.
We anticipate first deliveries from Utah, starting in 2025.
We're also actively looking for growth in the southeast by expanding our footprint into the coastal Carolinas and Florida markets.
Another initiative that will be accretive to our long term growth goals is with our mortgage company Tri Pointe connect.
Effective February one 2020 for Tri Pointe connect became a wholly owned subsidiary of Tri Pointe homes.
As we exercise the right to purchase a minority stake in our joint venture with long depot.
This alignment of mortgage operations with our core homebuilding business offers more flexibility in terms of the customer experience and competitive pricing and will provide increased earnings from our financial services business.
<unk> connect is an integral part of our business was strong customer satisfaction and mortgage capture rate.
We continue to see strength in quality in our homebuyers and backlog financing with Tri Pointe connect with an average annual household income of 198000.
The average FICO score of 753.
80% loan to value and a 40% debt to income ratio.
In summary, the prevailing positive macroeconomic conditions and strong housing fundamentals make us optimistic for 2024 and beyond.
Given this environment Tri Pointe is in excellent position to expand our scale in each of our markets, particularly considering and are well positioned land holdings and our experienced team members.
We are actively taking the necessary steps to capitalize on numerous growth opportunities that exist in the market today.
And are committed to deploying our capital into accretive long term growth initiatives.
That I will turn the call over to Glen Glen.
Thanks, Doug and good morning, I'm going to highlight some of our results and key financial metrics for the fourth quarter, and then finish my remarks, with our expectations and outlook for the first quarter and full year for 2024.
At times I'll be referring to certain information from our slide deck, which is posted on our website.
Slide six of the earnings call deck provides some of the financial and operational highlights from our fourth quarter.
We generated 1078 net new home orders in the fourth quarter, which was 143% increase compared to the prior year. Our absorption pace was 2.3 homes per community per month, 809% increase compared to the prior year.
As Ed mentioned December was the strongest month in the fourth quarter for order activity and that momentum has carried over with a strong start in 2024.
We reported 536 net new home orders in January which was a 27% increase year over year on a sales pace of three five homes per community per month.
And in January was broad based across both our markets and buyer segments and February is off to a similarly strong start.
We took a disciplined approach with our use of incentives in the fourth quarter, largely targeting incentives towards completed or move in ready homes.
Permanent rate buy downs remained popular use of incentives for our homebuyers.
Full incentives on orders in the fourth quarter were four 8% of revenue.
And it trended down to four 4% in January for.
For context, our historical incentive levels as the company had been in the range of 3% to 4%.
We ended the year with 155 active selling communities, which was a 14% increase over the prior year.
We plan to open approximately 65, new communities in 2024 and expect to close a similar number during the year.
Our new community openings are weighted more heavily to the first half of the year. So we expect to see a higher community count in the first and second quarter before leveling off in the back half of the year.
Based on our strong land pipeline with approximately 32000 owned or controlled loss, we expect to grow our 2025 ending community count by approximately 10%.
Looking at the balance sheet and capital spend we ended the quarter with approximately $1 6 billion of liquidity consisting of $869 million of cash on hand, and $698 million available under our unsecured revolving credit facility.
Our debt to capital ratio was 31, 5% and net debt to net capital ratio was 14, 6%.
We continue to be active in our share repurchase program repurchasing one 8 million shares during the quarter for a total aggregate dollar spend of $50 million.
For the fourth quarter, we invested approximately $275 million Atlanta land development.
Going forward, we expect to spend approximately $1 2 billion to $1 5 billion annually on land and land development to support our growth targets.
I'd like to summarize our outlook for the first quarter and full year for 2024.
For the first quarter, we anticipate delivering between 1200 fortune 100 homes at an average sales price between 645006 hundred 55000.
We expect homebuilding gross margin percentage to be in the range of 22% to 23% and anticipate our SG&A expense ratio to be in the range of 12% to 13%.
Lastly, we estimate our effective tax rate for the first quarter to be approximately 26, 5%.
For the full year, we anticipate delivering between 6000, 6300 homes, which would be a 17% increase year over year using the midpoint of our guidance.
We anticipate our average sales price on those deliveries to be between 645650 5000.
We expect homebuilding gross margin percentage to be in the range of 21, 5%.
The 22, 5% and anticipate our SG&A expense ratio to be in the range of 10, 5% to 11, 5% roughly.
Lastly, we estimate our effective tax rate for the year to be approximately 26, 5%.
With that I will turn the call back over to Doug for closing remarks.
Thanks Glen.
In summary, our industry remains positioned for long term success due to the continued supply shortage and strong consumer demand we discussed earlier.
That tri Pointe, where focus on steady growth to both the top and bottom lines.
Efficiently allocating our cash to support our growth initiatives and share buybacks.
We expect this focus will continue to benefit our shareholders by increasing book value per share year over year.
With a strong balance sheet composed of a land portfolio focus on core locations and ample liquidity, we are well positioned to meet our objectives going forward.
Finally, I want to express our gratitude to the entire Tri Pointe team for their hard work and dedication.
I'm, especially proud that their steadfast commitment to operational excellence led to Tri Pointe being named to the 2024 list of Fortune's world's most admired companies.
This is especially gratifying is that those on the list are ranked in chosen by industry peers for their financial soundness.
Long term investment value innovation and ability to attract and retain top talent among many factors we.
We couldnt be more proud of this team and what their talent and dedication promises for the future of our company now.
Now I'd like to turn it back to turn the call back over to the operator for any questions.
Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session.
If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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Our first question comes from the line of <unk>.
Joe How's Myer with Deutsche Bank. Please proceed with your question.
Hey, good morning, everybody how are you doing.
Hey, good.
Yeah, the comments on the land spend if.
You don't mind, maybe just going into a little more detail about where that's going to be deployed maybe from a buyer standpoint buyer level standpoint, and geographically just little more details on that.
Hey, Joe.
It's got to be more concentrated to the central and the east like we talked about but they are still and we still need to.
Resupply the community count in the west as well so it's it's it's fairly spread across our communities and its about half land back in half development is that kind of spend going forward.
Okay understood and does that include any.
Any potential deployment to M&A of smaller builders.
It does not include that though.
Okay understood and then just a quick follow up if I could on the decision to retire the debt.
Maybe just a little surprising kind of in the context of deploying capital to more accretive avenues I mean the.
Kind of after tax cost of debt pretty low relative to.
Incremental returns on your business. So just maybe talk about why.
You may be taking that out is it difficult to refinancing and you could probably put it on the revolver, even just any thoughts there.
Yeah, it's definitely not difficult to refinance its just where the rates are at right now are not that attractive to refinance it, especially considering we have almost $900 million of cash.
We always have the ability to be opportunistic and do a new debt issuance later on if rates are in a better place and we need the capital. So as of right now we have plenty of capital we're going to pay them off and then if we have different capital needs down the road, we can be opportunistic.
Okay I appreciate it thanks guys.
Thanks, Joe.
Yeah.
Our next question comes from the line of Truman Patterson with Wolfe Research. Please proceed with your question.
Hey, good morning, guys. Thanks for taking my questions.
Good morning, just wondering hey.
Hey, good morning, just wanted to run through the gross margin guidance are down I think about 70 bps year over year and 24 could you just help us understand what's embedded in that.
No land versus stick and brick inflation in.
Any thoughts on potential pricing power as we move through the year. The pricing power portion is I'm trying to understand you've got kind of a step down embedded in your gross margin guidance and into Q3 or four Q versus the first quarter.
Yeah Truman.
Doug.
Our forecast.
Our business plan forecast is for margins to be slightly down compared to 23, but.
It's early and with good market conditions, which we are currently seeing.
We should see those margins tightened sub.
Two two cost.
Cost conditions as well obviously, but.
That's where we see it right now, but we've got a long way to go.
Yeah understood and when I'm thinking about your All's community Count you know over the past couple of years I think as you know.
Quite a bit like 40% or so could.
Could you just talk about your kind of targeted absorption pace is it still in that three and a half range and I'm trying to understand if that might be a kind of an upper bound limit based on labor a lot availability and anything above that you kind of start polling on on the pricing lever a little bit harder.
Yes. This is Doug again Theres no.
Are bound limit for labor supply chain is actually quite normal.
If anything is normal in today's world. So.
But our pace.
Years and years and years ago, we kind of targeted.
Three but our pace today target is three and a half.
Okay got you and if I could just squeak a sneak one darin and there you know you said we're off to a good start in January and February just trying to understand with the pullback in rates in China, the demand rebound that you've seen so.
So far have you all been able to reduce either pull back on incentives at all of the past. Several weeks are you kind of taken a bit more of a wait and see approach not to disrupt the momentum building ahead of the spring selling season.
Thank you Jeremy and good question. This is Linda so yes, we are pulling back on incentives in January we were at four 4% and continuing to reduce that to under 4% month to date in February. So we're still seeing a good opportunity to keep a strong pace, while pulling back on entertainment community by community.
Perfect. Thank you all and good luck in 'twenty four.
Thanks, Jeremy.
Our next question comes from the line of Stephen Kim with Evercore. Please proceed with your question.
Yeah. Thanks, very much guys I appreciate all the color so far in the guidance.
Wanted to ask a couple of longer term questions just trying to get a sense for how youre thinking about positioning the company.
You know once the dust solar sort of settles here with.
With the rate volatility over the last couple of years.
So I'm curious if you could give us a sense for longer term goals for.
Let's say community count growth and the growth in the business I mean, you threw out a 10% number it sounds like we're going to see in 'twenty five because it sounds like 'twenty 'twenty four we're gonna be kind of flat by the end of the year on community count, but then growing 10%. It sounds like in 2025 wondering if that 10% is a good level that we should be thinking about for you guys for growth. Similarly curious if you could give us a.
Central what your target is for like you know leverage what you're sort of thinking longer term and then also what do you think the longer term operating margin can kind of be so kind of topline growth leverage you want to run the business at and kind of what you think is a sustainable kind of operating margin for the company.
Well as far as growth.
Take the topline Stephen this is Doug.
Our continuing to.
Establish operations, we are when you announced you saw last year and I would expect to have establish operations in Florida and coastal Carolina markets. This year so either.
Anticly or through M&A, we're going to continue to grow topline growth.
And in those new markets in our existing markets we've.
We've got 15 divisions across the country have or are close to stabilization on the west.
Generating strong cash flow very good margins.
And then the central and East continues to be our growth markets seeing tremendous growth as I mentioned in the prepared remarks and in the.
Texas and Carolina markets.
Which we're very bullish on.
And then Stephen I'll take some of the others on targeted leverage.
We don't have a specific target because it will depend on the business needs, but I think where we're at right now and then after we pay off the bonds is a good place to be where low thirties now on a debt to cap will be low twenties. After we pay off the bonds somewhere in that range. I think is a good spot for us to be in.
<unk>.
As far as margins long term Stephen I mean.
Listen, we underwrite our heartland deals 18.
So the 22% range, but we do self develop about 65, probably closer to 70% of our large and.
And when we underwrite underwrite those deals it's typically in the low twenties.
It's somewhere between 20% to 24% so you know.
If youre developing more lots you should have a better margin profile right. If youre buying finished lots youre going to be an 18%.
And I know you're out okay.
Go ahead go ahead.
No no no no and I are up here.
Okay.
I know you asked about operating margin and I think as we get more scale in the out years youre going to see that increase to the operating margin. Our goal there is to.
To get more leverage on our fixed costs and an increase that bottom line operating margin.
Hum It makes sense, Okay and then.
And then just to wrap up.
Let me interrupt you one more time.
Steven.
We're in a very known if anything as normal as I mentioned earlier, but you know what.
Our business plan is very simple.
We've increased book value per share of 15% since the end of 2015.
And our goal is very simple, we're going to increase book value per share.
10% to 15% through a combination of share repurchases and strong earnings. So our focus is driving the stock price up.
We just focus on book value per share because all the other.
Extraneous.
Discussion on multiples and everything and it really doesn't mean anything.
We will trade with the group however, they trade, where we're just focused on making more money going forward and delivering a great customer experience.
Okay. Yeah. That's that's helpful helpful context.
Yeah.
I noticed that your your lot option count.
Your supply, but the actual number of lot options you had declined for a couple of court has now climbed to two quarters in a row curious if you could give a little context around that where you see that going forward and.
And then Glen what do you what do you think is on a year supply owned basis.
A level that we should be thinking you can run the bit we intend to run the business at kind of low threes in terms of your supply owned.
It was my gosh, yes, Stephen good questions I think the overall lot supply that youre seeing and it's been kind of flattish over the last couple of quarters. That's just timing we have a strong pipeline.
And so there's good growth in that pipeline, but part of what Youre seeing is youre seeing a decrease in some of those longer term land holdings that are owned as we continue to work through some of those assets and we're replacing a lot of that with more option land.
So that's just a mix change there and then going forward, we were targeting two to three years owned from a land perspective and it just depends on the market. There are some markets, where we're under two and then some markets that we're closer to three but that's kind of the range.
Gotcha, great. Thanks, a lot guys I appreciate it.
Thanks, David.
Our next question comes from the line of Tyler Battery with Oppenheimer. Please proceed with your question.
Good morning, Thank you.
My first question just strategic.
<unk> market expansion new markets can you just revisit your philosophy around.
Organic market expansion compared with M&A talk through some of the positives and negatives. So those avenues and the reason I asked there has been a fair bit of M&A. So far in this space. This year. So I'm not sure if that changes your perspective or perhaps if you have a different view on the M&A landscape today compared with.
Compared with the last call in the fall.
No I mean like I mentioned earlier I would expect.
It's to establish operations in Florida and in the coastal Carolinas this year, either organically or through M&A.
As you can imagine the only the big difference between M&A and organic is you're paying a multiple of some sort on M&A and organically you are paid book value. So that's really the difference and frankly, we are we started organically back in 2009. So we do have a very strong playbook.
Growing organically.
Had tremendous success.
We will continue down both paths.
Okay, Okay great.
Up on gross margin just specific on the guidance in Q1, just help US bridge, where you exited in Q4 versus what you were expecting in Q1.
And you know it sounds like you're pulling back a little bit on incentives for gross margins.
Still gonna be perhaps bounce up so I'm just trying to get a good sense of whats your what youre expecting in terms of your outlook in Q1, specifically.
Yes, Doug talked about a little bit earlier, but just to give a few more details.
From Q4 to Q1.
Largely.
Flat.
Really strong margins in Q1, but then what youre seeing there is a little bit of land vintage too because we're opening new communities and closing out of older communities. So that plays a part into the full year guide.
But overall like Doug said, it's early and so as the spring selling season unfolds. If we continue to continue to see strong demand that'll have an impact on margin.
Okay, Great. That's all for me. Thank you.
Thanks Tyler.
Our next question comes from the line of Jesse Letterman with Zelman and Associates. Please proceed with your question.
Hey, good morning, Congrats on the strong results and thanks for taking my question.
Thanks Jesse.
At your Investor Day in May of 2022, you discussed your expectation for Asps to trend lower as your business shifts from California, and you start smaller homes can you talk a little bit more about the ladder how has the reception been.
From home buyers for some of the.
Attached and smaller product and is that still the plan with the affordability equation, becoming a bit more balanced here of late with the rates have been pulled back.
Yes. Good question, Jesse it's definitely still part of the plan and we've had executed on that plan.
Even in our you know what most people would consider higher price.
He is like California, we're doing a lot more attach than we used to and items like that with an eye towards affordability and pace.
And that's worked out well for us, but overall you will see our ASP trend down a little bit compared to where it's been and some of that is just mix they'll obviously with more more central and east deliveries from Texas, and the Carolinas, where the ASP is a little bit more affordable than those markets.
Great that's helpful.
One question on price point differentiation or are you seeing any particular segment.
<unk> are weaker.
As the year rolls over here.
Another good question when in the fourth quarter, we actually saw pretty consistent demand across all our segments from entry level first move up.
So overall pretty strong margin profiles are actually fairly consistent as well. So I think all segments or are working well.
And that has continued even with you know.
The strong start to the year have you seen any segment lag or be particularly strong or is it pretty consistent across that.
Pretty consistent.
Alright, thank you.
Our next question comes from the line of Jay Mccanless with Wedbush. Please proceed with your question.
Hey, good morning, everyone.
First question could you talk about where cycle times are now and how much further if at all you need to get back to pre COVID-19 levels.
Good question Jay This is Tom we're really pleased with the cycle time improvement.
It was one of our key initiatives last year and I'd say, we're back to.
Pre pandemic cycle times, our average our template of what we are striving for is a 115 day production schedule and we're pretty close to being right on schedule. So.
We may have the ability to extract a little bit more out of that as we're looking at new templates to potentially reduce cycle times even further.
Okay, Great. That's all I had thanks, everyone.
Thanks, Jay Thanks sure.
Our next question comes from the line of Mike Dahl with RBC capital markets. Please proceed with your question.
Good morning, Thanks for taking my questions.
Just another follow up on kind of the.
Alright, the incentive trends, it's encouraging to hear that February to date has come down further we have had a bit of an uptick in rates and fed versus Jan yes. It sounds like things are so strong on the ground youre dialing back incentives can you talk a little bit more to that.
Do you think you've still been able to secure kind of advantaged.
Rates and therefore, your you haven't seen that impact yet or do you think as we move through the various star. This spring. So the demand has just been.
Strong enough.
That that this uptick in rate Hasnt had really any impact here.
Hey, Mike It's Doug.
Linda mentioned earlier incentives on orders in the quarter were four 8%.
We have a very good supplier.
Move in ready homes promoting rate buy downs.
But theyre typically use we don't use any forge.
What about 86% of our orders are using some sort of financing incentives.
Most of it's permanent versus <unk>.
Versus temporary.
Another factor in our backlog had TPC, our average mortgage rate was six 3%.
With using 2.1% points.
And the.
Our work backlog and in the Q4 TPC deliveries at $6 six so.
The beauty of higher rates as the homebuilders have the ability to pull a lot of levers to keep absorptions. We had another excellent week of sales last week.
So there is this continued locked in effect with the retail market that continues to allow.
The new homebuilders to increase market share of a total home sales I think its well over 30% now which is typically 10.
And my own personal forecast I think rates are going to stay pretty much where they are maybe trend up a little but it's election year, so probably wont it probably wont move much but.
That's where it is right now.
Got it yes.
Doug I was kind of curious about whether there was any impact from forwards in there that maybe just delayed.
Some of the.
Some of the impact.
Kind of going back about something but it doesn't sound like that's the case, which which again is encouraging to hear you're going to dial back.
Further in February.
I guess just segue since you brought up the point on what you are.
What your stats look like for.
TPC can you now that Thats wholly owned can you help us level set on the.
The what we should be thinking about for total contribution.
From from.
From finance.
Operations, this year and how that compared to.
You still have profits you had some other income so just if there's kind of an apples to apples comparison, we should be thinking about 24 versus 23.
Sure My K. This is Glen so under our old model. When we were a joint venture we got 65% of the economics of those transactions. So.
Just assuming we're going to get 100% of the economics going forward is probably a good place to start I think longer term as we get more efficient in that business, we can probably even drop more economics from <unk>.
Our financing financial services.
Our mortgage company and we're also continuing to look at other ancillary businesses to add to that financial services area as well.
Got it okay. Thank you.
Thanks, Mike.
Our next question comes from the line of Alex Barron with housing Research Center. Please proceed with your question.
Hey, guys, great job for the quarter and the year.
My questions are around your geographic expansion into Utah, and you mentioned the Florida.
Just wondering if you guys can help us on the timing.
Of when we would see you know first orders and first deliveries in those two respective markets roughly.
Yeah. This is Doug.
We're expecting deliveries.
In Utah by the end of 'twenty, five and I would expect deliveries from the Florida and coastal markets in <unk> and.
In 'twenty six.
Got it thanks and then.
As far as your margin guidance it.
It looks like it's going to trend lower in the.
Back half of the year versus the first quarter is that because you guys increased incentives recently or are you just geographic mix, that's kind of trending you in that direction.
Yes.
Can you repeat that question.
Yeah.
Your guidance for the margins the gross margins.
But that you expect 22% to 23% in the first quarter, and then 21.5 to $22 five for the full year. So I'm trying to understand what's causing that trend is it that you increased your incentives recently or just the geographic.
Sure.
Land costs are what what's driving that yes.
Yes, it's mainly just land vintage closing out of some higher <unk>.
Margin you know older communities in the first part of the year and then you know you were opening like we said.
65 ish communities new communities. This year that are a newer land vintage. So it's some of that is just the mix of that but like we said earlier.
Will all depend on how demand if demand continues the way it's going right now you could see some upside to margin.
As the year goes it goes forward.
Okay, and then if I could ask one more I think I heard or let's say, 60% growth in Texas over two years and 30% in the Carolinas.
Referencing deliveries versus deliveries in 2023 year versus orders.
That was correct deliveries deliveries, yes, 23 versus <unk> 23.
The next two years.
Got it alright awesome, thanks, a lot and good luck.
Thank you thanks, Alex.
There are no further questions in the queue I'd like to hand, the call back to Doug Bauer for closing remarks.
But I'd like to thank everyone for joining us today, and we look forward to chatting with all of you next quarter have a great week. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.