Q2 2024 M/I Homes Inc Earnings Call

regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly.

Operator: from Discussing Significant Non-Public Items With You Directly. And as to the forward-looking statements, once we remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call.

Phillip G. Creek: discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to you.

Speaker Change: And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements

Speaker Change: Contained in today's press release. Also applies to any comments made during this call.

Speaker Change: Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to Bob. Thanks, Phil. Good morning, and thank you for joining us today.

Operator: With that, I'll turn the call over to Bob.

Robert H. Schottenstein: Thanks, Phil. Good morning, and thank you for joining us today.

Bob: Thanks, Phil.

Bob: Good morning, and thank you for joining us today. We had a very strong second quarter highlighted by record-setting revenue, income, gross margins, and pre-tax margins. We are very pleased with our second quarter results, clearly one of the best quarters in company history. We are particularly pleased with our performance given the general economic uncertainty that dominated the second quarter, a quarter that featured rising rates and a fair amount of rate volatility, a slight decline in both traffic and demand when compared to the first quarter, and an overall general sense that buyers were becoming slightly more cautious about purchasing a new home.

Robert H. Schottenstein: We had a very strong second quarter, highlighted by record-setting revenue, income, gross margins, and pre-tax margins. We are very pleased with our second quarter results, clearly one of the best quarters in company history. We are particularly pleased with our performance given the general economic uncertainty that dominated the second quarter, a quarter that featured rising rates and a fair amount of rate volatility. A slight decline in both traffic and demand when compared to the first quarter, and an overall general sense that buyers were becoming slightly more cautious about purchasing a new home.

Bob: We had a very strong second quarter, highlighted by record-setting revenue, income, gross margins, and pre-tax margins.

Bob: We are very pleased with our second quarter results, clearly one of the best quarters in company history.

Speaker Change: We are particularly pleased with our performance given the general economic uncertainty that dominated the second quarter.

Speaker Change: A quarter that featured rising rates and a fair amount of rate volatility, a slight decline in both traffic and demand when compared to the first quarter, and an overall general sense that buyers were becoming slightly more cautious about purchasing a new home.

Bob: Even though we have seen a rise in inventory in select markets, most notably Florida and Texas, we strongly believe that the underlying fundamentals of our industry remain strong. There exists a housing shortage in every one of our 17 markets, and we continue to see an ever-increasing number of millennials and Gen Z buyers seeking home ownership. All of this suggests a very bright future for our industry. In terms of our performance, we closed 2,224 homes in the second quarter. 12% better than last year, with second quarter revenues reaching a record $1.1 billion. Gross margins work extremely strong, coming in at 28%, compared to 26% last year.

Robert H. Schottenstein: Even though we have seen a rise in inventory in select markets, most notably Florida and Texas, we strongly believe that the underlying fundamentals of our industry remain strong. There exists a housing shortage in every one of our 17 markets, and we continue to see an increasing number of Millennials and Gen Z buyers seeking home ownership. All of this suggests a very bright future for our industry. In terms of our performance, we closed 2,224 homes in the second quarter.

Speaker Change: Even though we have seen a rise in inventory in select markets, most notably Florida and Texas, we strongly believe that the underlying fundamentals of our industry remain strong.

Speaker Change: There exists a housing shortage in every one of our 17 markets, and we continue to see an ever-increasing number of Millennials and Gen Z buyers seeking home ownership. All of this suggests a very bright future for our industry.

Speaker Change: In terms of our performance, we closed 2,224 homes in the second quarter, 12% better than last year, with second quarter revenues reaching a record $1.1 billion.

Robert H. Schottenstein: 12% better than last year, with second quarter revenues reaching a record $1.1 billion. Gross margins were extremely strong, coming in at 28% compared to 26% last year. Moreover, our pre-tax margins were 17.5% compared to 15.3% last year. This resulted in a record pre-taxed income of $194.1 million, 25% better than a year ago, and a very solid return on equity of 21%. We sold 2,255 homes during the quarter, a 3% improvement over 2023. As mentioned earlier, demand and traffic somewhat slowed from the strong first quarter as the second quarter began in April.

Speaker Change: Gross margins were extremely strong, coming in at 28% compared to 26% last year.

Bob: Moreover, our pre-tax margins were 17.5%, compared to 15.3% last year. This resulted in record pre-tax income of $194.1 million, 25% better than a year ago, and a very solid return on equity of 21%. We sold 2,255 homes during the quarter, a 3% improvement over 2023. As mentioned earlier, demand and traffic somewhat slowed from the strong first quarter as the second quarter began in April. The quality of our buyers continues to be very good, with average credit scores of 750 and an average down payment of 19% or just over $90,000. And our Smart Series, which is our most affordable line of homes, continues to be a very successful and important contributor to our business, with Smart Series sales comprising 53% of second quarter sales.

Speaker Change: Moreover, our pre-tax margins were 17.5% compared to 15.3% last year.

Speaker Change: This resulted in record pre-taxed income of $194.1 million, 25% better than a year ago, and a very solid return on equity of 21%.

Speaker Change: We sold 2,255 homes during the quarter, a 3% improvement over 2023. As mentioned earlier, demand and traffic somewhat slowed from the strong first quarter as the second quarter began in April .

Robert H. Schottenstein: The quality of our buyers continues to be very good, with average credit scores of 750 and an average down payment of 19%, or just over $90,000, and our Smart Series, which is our most affordable line of homes, continues to be a very successful and important contributor to our business, with Smart Series sales comprising 53% of second quarter sales. Now, I will provide some additional comments on our market. Our division income contributions in the second quarter were led by Dallas, Columbus, Tampa, Chicago, Orlando, and Cincinnati.

Speaker Change: The quality of our buyers continues to be very good, with average credit scores of $750 and an average down payment of 19%, or just over $90,000.

Speaker Change: And our Smart Series, which is our most affordable line of homes, continues to be a very successful and important contributor to our business, with Smart Series sales comprising 53% of second quarter sales.

Bob: Now I will provide some additional comments on our markets. Our division income contributions in the second quarter were led by Dallas, Columbus, Tampa, Chicago, Orlando, and Cincinnati. New contracts for the second quarter in our northern region increased by 6%, while new contracts in our southern region were flat compared to last year. Closings in the southern region increased by 5% from last year, and deliveries or closings in the northern region increased by 21% from last year. 57% of our closings came out of the Southern region, with a balance of 43 coming out of the Northern region.

Robert H. Schottenstein: New contracts for the second quarter in our northern region increased by 6%, while new contracts in our southern region were flat compared to last year. Closings in the southern region increased by 5% from last year, and deliveries or closings in the northern region increased by 21% from last year. 57% of our closings came out of the southern region, with a balance of 43 coming out of the northern region. Our owned and controlled lot position in the southern region increased by 22% compared to a year ago and increased 16% from last year in the northern region. 34% of our owned and controlled lots are in the northern region, with 66% being in the southern region. We have an exceptionally strong land position.

Speaker Change: Now I will provide some additional comments on our markets.

Speaker Change: Our division income contributions in the second quarter were led by Dallas, Columbus, Tampa, Chicago, Orlando, and Cincinnati.

Speaker Change: New contracts for the second quarter in our northern region increased by 6%, while new contracts in our southern region were flat compared to last year.

Speaker Change: Closings in the southern region increased by 5% from last year, and deliveries or closings in the northern region increased by 21% from last year.

Speaker Change: 57% of our closings came out of the southern region, with a balance of 43% coming out of the northern region.

Bob: Our owned and controlled lot position in the southern region increased by 22% compared to a year ago and increased 16% from last year in the northern region. 34% of our owned and controlled lots are in the northern region, with 66% being in the southern region. We have an exceptionally strong land position company-wide. We own approximately 23,000 lots, which is roughly a three-year supply in line with our strategy.

Speaker Change: Our owned and controlled lot position in the southern region increased by 22% compared to a year ago, and increased 16% from last year in the northern region.

Speaker Change: 34% of our owned and controlled lots are in the northern region with 66% being in the southern region.

Robert H. Schottenstein: Company-wide, we own approximately 23,000 lots, which is roughly a three-year supply, in line with our strategy. In regards to our balance sheet, we ended the second quarter of 2024 with an all-time record $2.7 billion of equity, equating to a book value per share of $100. We also ended the quarter with over $800 million of cash and zero borrowings under our $650 million unsecured revolving credit facility. This resulted in a debt-to-capital ratio of 20% and a net debt-to-capital ratio of minus 6%.

Speaker Change: We have an exceptionally strong land position. Company-wide, we own approximately 23,000 lots, which is roughly a three-year supply, in line with our strategy.

Bob: In regards to our balance sheet, we ended the second quarter of 2024 with an all-time record $2.7 billion of equity, equating to a book value per share of $100. We also ended the quarter with over $800 million of cash and zero borrowings under our $650 million unsecured revolving credit facility. This resulted in a debt to capital ratio of 20% and a net debt to capital ratio of minus 6%. As I conclude, let me just state that we are in the best financial condition in our history. Our balance sheet has never been stronger, and we have a lot of operating momentum.

Speaker Change: In regards to our balance sheet, we ended the second quarter of 2024 with an all-time record $2.7 billion of equity, equating to a book value per share of $100.

Speaker Change: We also ended the quarter with over $800 million of cash and zero borrowings under our $650 million unsecured revolving credit facility.

Speaker Change: This resulted in a debt-to-capital ratio of 20% and a net debt-to-capital ratio of minus 6%.

Robert H. Schottenstein: As I conclude, let me just state that we are in the best financial condition in our history. Our balance sheet has never been stronger, and we have a lot of operating momentum. We feel very good about our business and the home building industry and want to state that M.I. Homes is well positioned to have a very strong 2024. With that, I'll turn it over to Phil.

Speaker Change: As I conclude, let me just state that we are in the best financial condition in our history. Our balance sheet has never been stronger, and we have a lot of operating momentum.

Bob: We feel very good about our business and the home building industry and want to state that MI Homes is well positioned to have a very strong 2024.

Speaker Change: We feel very good about our business and the home building industry and want to state that M.I. Homes is well positioned to have a very strong 2024.

Phil: With that, I'll turn it over to Phil.

Phil: Thanks, Bob. Our new contracts were up 1% in April, flat in May, and up 8% in June, and our cancellation rate for the second quarter was 10%. 53% of our second quarter sales were the first time buyers, and 60% were inventory homes.

Phillip G. Creek: Thanks, Bob. Our new contracts were up 1% in April, flat in May, and up 8% in June. And our cancellation rate for the second quarter was 10%. 53% of our second quarter sales were to first-time buyers, and 60% were inventory homes. Our community count was 211 at the end of the second quarter compared to 195 a year ago. And the breakdown by region is 92 in the northern region and 119 in the southern region.

Speaker Change: With that, I'll turn it over to Phil. Thanks, Bob. Our new contracts were up 1% in April , flat in May, and up 8% in June . And our cancellation rate for the second quarter was 10%.

Phil: Fifty-three percent of our second-quarter sales were to first-time buyers, and sixty percent were inventory homes.

Phil: Our community count was 2.11 at the end of the second quarter compared to 195 a year ago, and the breakdown by region is 92 in the northern region, 119 in the southern region. During the quarter, we opened 17 new communities while closing 25. We currently estimate that our average 2024 community count will be about 5% higher than last year. We delivered 2,224 homes in the second quarter, which was 66% of our backlog, and 30% of our second quarter closings came from inventory homes that were sold and closed in the quarter. As of June 30th, we had 5,100 homes in the field versus 4,700 homes in the field a year ago and 4,500 homes in the field at 3,31,24.

Speaker Change: Our community count was 211 at the end of the second quarter compared to 195 a year ago.

Phil: And the breakdown by region is 92 in the northern region, 119 in the southern region.

Phillip G. Creek: During the quarter, we opened 17 new communities while closing 25. We currently estimate that our average 2024 community camp will be about 5% higher than last year. We delivered 2,224 homes in this second quarter, which was 66% of our backlog. And 30% of our second quarter closings came from inventory homes that were sold and closed in the quarter. As of June 30th, we had 5,100 homes in the field versus 4,700 homes in the field a year ago and 4,500 homes in the field at 331-24.

Speaker Change: During the quarter, we opened 17 new communities, while closing 25. We currently estimate that our average 2024 community count will be about 5% higher than last year.

Speaker Change: We delivered 2,224 homes in this second quarter, which was 66% of our backlog. And 30% of our second quarter closings came from inventory homes that were sold and closed in the quarter.

Speaker Change: As of June 30th, we had 5,100 homes in the field versus 4,700 homes in the field a year ago and 4,500 homes in the field at 3,3124.

Phillip G. Creek: Our revenue increased 9% in the second quarter, and our average closing price in the quarter was $482,000, a 2% decrease when compared to last year's second quarter. Our second quarter gross margin was a record 27.9 percent, up 240 basis points year over year and up 80 basis points from our first quarter. Our construction costs were flat in the second quarter compared to the first quarter, and our cycle time decreased by 10 days in the second quarter compared to the first quarter. Our second quarter issuing expenses were $11.00 of revenue. Compared to 10.6 a year ago, our increased costs were due to our increased community count, higher selling expenses, and additional headcount.

Phil: Our revenue increased 9% in the second quarter, and our average closing price in the quarter was 482,000, at a 2% decrease when compared to last year's second quarter. Our second quarter gross margin was a record 27.9%, up 240 basis points year over year and up 80 basis points from our first quarter. Our construction costs were flat in the second quarter compared to the first quarter, and our cycle time decreased by 10 days in the second quarter versus the first. Our second quarter issue in expenses were 11.0 of revenue compared to 10.6 a year ago. Our increased costs were due to our increased community count, higher selling expenses, and additional headcount.

Speaker Change: And our average closing price in the quarter was $482,000, a 2% decrease when compared to last year's second quarter.

Speaker Change: Our second quarter gross margin was a record 27.9%, up 240 basis points year over year, and up 80 basis points from our first quarter.

Speaker Change: Our construction costs were flat in the second quarter compared to the first quarter, and our cycle time decreased by 10 days in the second quarter versus the first quarter.

Speaker Change: Our second quarter issuing expenses were $11.00 of revenue compared to $10.60 a year ago. Our increased costs were due to our increased community count, higher selling expenses, and additional headcount.

Derek J. Klutch: Interest income, net of interest expense for the quarter was $7.3 million, and our interest incurred was $8.8 million. We are very pleased with our returns for the second quarter. Our pre-tax income was 17%, and our return on equity was 21%. During the quarter, we generated $200 million of EBITDA compared to $164 million in last year's second quarter. And our effective tax rate was 24% in the second quarter, the same as last year.

Phil: Interest income, net advantage expense for the quarter was $7.3 million, and our interest incurred was $8.8 million. We are very pleased with our returns for the second quarter. Our pre-tax income was 17% and our return on equity was 21%. During the quarter, we generated 200 million of EBITDAQ compared to 164 million in last year's second quarter. And our effective tax rate was 24% in the second quarter, the same as last year. Our earnings predicted share for the quarter increased to an all-time record, $5.12 per share, from $4.12 per share last year, up 24%.

Speaker Change: Interest income, net administrative expense for the quarter was $7.3 million and our interest incurred was $8.8 million.

Speaker Change: We are very pleased with our returns for the second quarter. Our pre-tax income was 17% and our return on equity was 21%.

Speaker Change: During the quarter, we generated $200 million of EBITDA compared to $164 million in last year's second quarter.

Speaker Change: And our effective tax rate was 24% in the second quarter, the same as last year.

Derek J. Klutch: Our earnings per diluted share for the quarter increased to an all-time record $5.12 per share from $4.12 per share last year, up 24%. And our book value per share is now $100, a $17 per share increase from a year ago. Now Derek Klutch will address our mortgage company results.

Speaker Change: Our earnings per diluted share for the quarter increased to an all-time record $5.12 per share from $4.12 per share last year, up 24%.

Phil: And our book value per share is now $100, a $17 per share increase from a year ago.

Speaker Change: And our book value per share is now $100.

Derek: Now Derek Klutch will address our mortgage company results.

Speaker Change: A $17 per share increase from a year ago. Now Derek Klutch will address our Mortgage Company results.

Derek: Thanks, Phil. Our mortgage and title operations achieved pre-tax income of $14.4 million, an increase of 29% from $11.2 million in 2023's second quarter. Revenue increased 22% from last year to an all-time quarterly record of $30.8 million, due to higher margins on loans sold and an increase in loans originated and proceeds from the sale of servicing rights.

Derek J. Klutch: Our mortgage and title operations achieved pre-tax income of $14.4 million, an increase of 29% from $11.2 million in 2023's second quarter. Revenue increased 22% from last year to an all-time quarterly record of $30.8 million, due to higher margins on loans sold, an increase in loans originated, and proceeds from the sale of servicing rights.

Derek J. Klutch: Thanks Phil. Our mortgage and title operations achieved pre-tax income of $14.4 million, an increase of 29% from $11.2 million in 2023's second quarter.

Derek J. Klutch: Revenue increased 22% from last year to an all-time quarterly record of $30.8 million due to higher margins on loans sold, an increase in loans originated, and proceeds from the sale of servicing rights.

Derek: This was offset partially by a lower average loan amount. The average loan to value on our first mortgages for the second quarter was 81%, compared to 84% last year. Continue to see an increase in the use of government financing, at 69% of loans closed in the quarter were conventional and 31% FHA or VA, compared to 71% and 29% respectively for 2023's second quarter. Our average mortgage amount decreased to $395,000 in 2024's second quarter, compared to $402,000 last year. Lones originated increased to 1,618, which was up 26% from last year, while the volume of loans sold increased by 20%.

Derek J. Klutch: This was offset partially by a lower average loan. The average loan-to-value on our first mortgages for the second quarter was 81 percent compared to 84 percent last year. We continue to see an increase in the use of government finance. 69% of loans closed in the quarter were conventional, and 31% FHA or VA, compared to 71% and 29%, respectively, for 2023's second quarter. Our average mortgage amount decreased to $395,000 in 2024's second quarter compared to $402,000 last year.

Derek J. Klutch: This was offset partially by a lower average loan amount.

Derek J. Klutch: The average loan-to-value on our first mortgages for the second quarter was 81% compared to 84% last year.

Derek J. Klutch: We continue to see an increase in the use of government financing, as 69% of loans closed in the quarter were conventional and 31% FHA or VA, compared to 71% and 29% respectively for 2023's second quarter.

Derek J. Klutch: Our average mortgage amount decreased to $395,000 in 2024 second quarter compared to $402,000 last year.

Derek J. Klutch: Loans originated increased to $1,618, which was up 26% from last year, while the volume of loans sold increased by 20%. Our borrower profile remains solid, with an average down payment of 19% and an average credit score of 750 compared to 743 in 2023's second quarter. Finally, our mortgage operation captured 87% of our business in the quarter, a significant improvement from 81% last year. Now, I'll turn the call back over to

Derek J. Klutch: Loans originated increased to $1,618, which was up 26% from last year, while the volume of loans sold increased by 20%.

Derek: Our borrower profile remains solid, with an average down payment of 19%, and an average credit score of $750,000 compared to $743 in 2023's second quarter. Finally, our mortgage operation captured 87% of our business in the quarter, a significant improvement from 81% last year.

Derek J. Klutch: Our borrower profile remains solid, with an average down payment of 19% and an average credit score of 750 compared to 743 in 2023's second quarter.

Derek J. Klutch: Finally, our mortgage operation captured 87% of our business in the quarter, a significant improvement from 81% last year.

Phil: Now I'll turn the call back over to Phil.

Phil: Thanks, Derek. It's for the balance sheet. We ended the second quarter with a cash balance that weighed around 37 million, and no borrowings under our unsecured, revolving credit facility. We have one of the lowest debt levels of the public home builders, and we are well-positioned with our maturities. Our bank line maturers in late 2026, and our public debt maturers in 2028 and 2030, and have interest rates below 5%. Our unsold land investment at June 30th, 24, is 1.5 billion compared to 1.3 billion a year ago. At June 30th, we had 810 million of raw land that land under development, and 643 million of finished unsold loss.

Phillip G. Creek: Thanks, Derek. On the balance sheet, we ended the second quarter with a cash balance of $837 million and no borrowings under our unsecured revolving credit facility. We have one of the lowest debt levels of the public home builders and are well positioned with our maturities. Our bank line matures in late 2026, and our public debt matures in 2028 and 2030 and has interest rates below 5%.

Derek J. Klutch: Now, I'll turn the call back over to Phil. Thanks, Derek. For the balance sheet, we ended the second quarter with a cash balance of $837 million and no borrowings under our unsecured revolving credit facility.

Phil: We have one of the lowest debt levels of the public home builders and are well positioned with our maturities. Our bank line matures in late 2026 and our public debt matures in 2028 and 2030.

Phillip G. Creek: Our unsold land investment at June 30, 2024 is $1.5 billion compared to $1.3 billion a year ago. At June 30th, we had $810 million of raw land and land under development and $643 million of finished unsold lots. During the second quarter, we spent $119 million on land purchases and $145 million on land development for a total of $264 million. As of June 30th, we owned 23,000 lots and controlled 49,000 lots. And at the end of the quarter, we had 372 completed inventory homes and 2150 Total Inventory Homes.

Speaker Change: and have interest rates below 5%. Our unsold land investment of June 30, 2024 is $1.5 billion compared to $1.3 billion a year ago.

Speaker Change: At June 30th, we had $810 million of raw land and land under development and $643 million of finished unsold lots.

Phil: and during the second quarter, we spent 119 million on land purchases and 145 million on land development for a total of 264 million. At June 30, we owned 23,000 lots and controlled 49,000 lots. And at the end of the quarter, we had 372 completed inventory homes and 2,150 total inventory homes. And 1,278 are in the Southern region. At June 30, 23, we had 303 completed inventory homes and 1,737 total inventory homes.

Speaker Change: And during the second quarter, we spent $119 million on land purchases and $145 million on land development for a total of $264 million.

Speaker Change: At June 30th, we owned 23,000 lots and controlled 49,000 lots. And at the end of the quarter, we had 372 completed inventory homes.

Speaker Change: and 2,150 total inventory homes. And of the total inventory, 872 are in the northern region and 1,278 are in the southern region.

Speaker Change: At June 30, 2023, we had 303 completed inventory homes and 1,737 total inventory homes.

Phil: We spent 50 million in the second quarter, repurchasing our stock up from our first quarter's 25 million and have 200 million remaining under our current board authorization. Since 2022, we have repurchased 12% of our outstanding shares.

Speaker Change: We spent $50 million in the second quarter repurchasing our stock, up from our first quarter's $25 million, and have $200 million remaining under our current board authorization. Since 2022, we have repurchased 12% of our outstanding shares.

Phil: This completes our presentation.

Phillip G. Creek: And of the total inventory, 872 are in the northern region and 1,278 are in the southern region. At June 30, 2023, we had 303 completed inventory homes and 1,737 total inventory homes. We spent $50 million in the second quarter repurchasing our stock, up from our first quarter's $25 million, and we have $200 million remaining under our current board authorization. Since 2022, we have repurchased 12% of our outstanding shares. This completes our presentation. We will now open the call to any questions or comments. Thank you.

Operator: When I'll open the call for any questions or comments. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to climb from the polling process, please press star followed by the two. And if you are using a speaker phone, please lift the handset before pressing any keys.

Speaker Change: This completes our presentation. We will now open the call for any questions or comments.

Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the 2. And if you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2.

Speaker Change: And if you are using a speakerphone, please lift the handset before pressing any keys.

Operator: First question comes from Alan Ratner at Salmon Associates. Please go ahead.

Operator: The first question comes from Alan Ratner at Zellman & Associates. Please go ahead. I can't hear them. Mr. Ratner, your line is open. Please proceed with your question.

Speaker Change: First question comes from Alan Ratner at Zellman & Associates. Please go ahead.

Operator: I can't hear him. Mr. Ratner, your line is open. Please proceed with your question.

Speaker Change: Can't hear them.

Alan Ratner: Can you hear me now?

Speaker Change: Mr. Ratner, your line is open. Please proceed with your question.

Alan S. Ratner: Yep.

Alan Ratner: Hi, Alan. Hey, I'm sorry about that technical difficulties. Thanks for taking my question, and great, great job in the quarter. Congrats on the strong performance. Thanks a lot.

Alan S. Ratner: Hey Bob, sorry about that. There were some technical difficulties.

Alan S. Ratner: Can you hear me now?

Alan S. Ratner: Thanks for taking my question, and great job in the quarter, congrats on the strong performance.

Alan S. Ratner: Thanks for taking my question and a great, great job in the quarter. Congratulations on the strong performance. Thanks a lot.

Alan Ratner: Yeah, Bob, I'd love to drill in a little bit on the trends through the quarter and maybe into July. You mentioned demand and traffic slowed a bit, which is consistent. I think with what others have been saying, your order is by month, though. You did see an uptick, at least on a year or a year basis, in June.

Robert H. Schottenstein: Yeah, Bob, I'd love to drill in a little bit on the trends through the quarter and maybe into July. You know, you mentioned demand and traffic slowed a bit, which is consistent, I think, with what others have been saying. Your orders by month, though, you did see an uptick at least on a year-over-year basis in June. So I'm curious, you know, whether that's a function of kind of the buyers maybe coming back a little bit more as rates pulled back, or did you do anything, you know, on incentives or pricing to maybe drive those better order results? And where do you see the kind of broader demand and incentive environment heading into the back half of the year?

Alan S. Ratner: Yeah, Bob, I'd love to drill in a little bit, you know, on the trends through the quarter and maybe into July . You know, you mentioned demand and traffic slowed a bit, which is consistent, I think, with what what others have been saying.

Speaker Change: Your orders by month, though, you know, you did see an uptick at least on a year-over-year basis in June . So I'm curious, you know, whether that's a function of...

Alan Ratner: So I'm curious whether that's a function of kind of the buyers maybe coming back a little bit more, is ready to pull back, or did you do anything on incentives or pricing to maybe drive those better order results. And where do you see the broader demand and incentive environment heading into the back half of the year?

Speaker Change: kind of the buyers maybe coming back a little bit more as rates pulled back, or did you do anything, you know, on incentives or pricing to maybe drive those better order results? And where do you see kind of the broader demand and incentive environment heading into the back half of the year?

Bob: Great questions. We won't make any comments on July, which is typically what we do with all these calls. We don't comment on the current month, and even though it's almost over, there's usually a fair amount of activity in the last several days anyway.

Robert H. Schottenstein: Great questions. We won't make any comments on July, which is typically what we do with all these calls. We don't comment on the current month. And even though it's almost over, there's usually a fair amount of activity in the last several days anyway. So I wouldn't want to suggest anything one way or the other, anyway.

Speaker Change: Great questions.

Speaker Change: We won't make any comments on July , which is typically what we do with all these calls. We don't comment on the current month.

Speaker Change: There's usually a fair amount of activity in the last several days anyway. So I wouldn't want to suggest something one way or the other regardless. But I think that

Bob: So I wouldn't want to suggest something one way or the other, regardless. But I think that we did incent a little bit more in June, not significant, but we did do a little bit more with below-market financing commitments, which is below-market financing that generally only applies to homes that can be delivered within 60 days or so. So it's a product that, as is the case with our competition, applies to spec homes.

Robert H. Schottenstein: But I think that we did incent a little bit more in June. Not significantly, but we did do a little bit more with below-market financing commitments, which is below-market financing that generally only applies to homes that can be delivered within 60 days or so. So it's a product that, as is the case with our competition, applies to spec homes.

Speaker Change: We did incent a little bit more in June , not significant.

Speaker Change: Well, we did do a little bit more with below-market financing commitments, which is below-market financing that generally only applies to homes that can be delivered within 60 days or so, so it's a product that...

Speaker Change: as is the case with our competition, applies to spec homes.

Bob: It's really hard to know exactly how things are going to shake out in the back half of the year. I think most people believe that we're looking at one or two rate cuts. One's probably priced in, not so sure about the second one, but it looks like if I had to guess, I think we're going to continue to have to provide at the same levels we are now the kind of financing incentives to get the sales that we need. We're very happy with the fact that for the first six months of this year, our sales are up 10%.

Robert H. Schottenstein: It's really hard to know exactly how things are going to shake out in the second half of the year. I think most people believe that we're looking at one or two rate cuts, one's probably priced in, not so sure about the second one, but it looks like... If I had to guess, I think we're going to continue to have to provide, at the same levels we are now, the kind of financing incentives to get the sales that we need. We're very happy with the fact that, for the first six months of this year, our sales were up 10%. Clearly, they slowed down a little bit in the second quarter.

Speaker Change: It's really hard to know exactly how things are going to shake out in the back half of the year.

Speaker Change: I think most people believe that we're looking at one or two rate cuts. One's probably priced in. Not so sure about the second one. But it looks like...

Speaker Change: You know, if I had to guess, I think we're going to continue to have to provide, at the same levels we are now, the kind of financing incentives to get the sales that we need.

Speaker Change: We're very happy with the fact that for the first six months of this year our sales are up 10%.

Bob: Clearly, they slowed a little bit in the second quarter. Some of that is obviously seasonal. I think some of it also was a bit of caution by buyers.

Robert H. Schottenstein: Some of that is obviously seasonal, but I think some of it also is a bit of caution by buyers. There was a lot of inter-quarter noise from all different places and parts of the economy and, you know, we've got an election coming up, and who knows how that's going to affect everything, as we all know. But... [inaudible] I'm really optimistic about business. I think that the builders are very well positioned, most, anyway. We've never been in better shape from a liquidity standpoint. Our debt levels are very low.

Speaker Change: Clearly they slowed a little bit in the second quarter. Some of that is obviously seasonal. But I think some of it also was a bit of caution by buyers. And there was a lot of inter-quarter noise.

Bob: There was a lot of inter-quarter noise from all different places and parts of the economy. We've got an election coming up, and who knows how. That's going to affect everything, as we all know.

Speaker Change: From all different places and parts of the economy and, you know, we've got an election coming up and who knows how that's going to affect everything as we all know.

Bob: Overall, I'm really optimistic about business. I think that the builders are very well positioned, most anyway. We've never been in better shape from a liquidity standpoint. Our debt levels are very low. We're gaining market share in almost all of our markets. There's always something that's not quite hitting on all cylinders, but we're hitting on all cylinders in a whole lot of our places. I love our footprint. Our product diversity is strong. Our land position is strong. We're poised to increase community count. We're really optimistic about next year and what the future lies. We've got a ways to get there yet, but this is going to be a really strong year for MI.

Speaker Change: [inaudible]

Speaker Change: I'm really optimistic about business. I think that the builders are very well positioned, most anyway. We've never been in better shape from a liquidity standpoint. Our debt levels are very low. We're gaining market share in...

Robert H. Schottenstein: We're gaining market share in almost all of our markets. There's always something that's not quite hitting on all cylinders, but we're hitting on all cylinders in a whole lot of our places. And I love our footprint. Our product diversity is strong. Our land position is strong.

Speaker Change: In almost all of our markets, there's always something that's not quite hitting on all cylinders. But we're hitting on all cylinders in a whole lot of our places.

Speaker Change: and I love our footprint.

Speaker Change: Our product diversity.

Robert H. Schottenstein: We're poised to increase our community count. We're really optimistic about next year and what the future lies. But we've got a ways to get there yet. But this is going to be a really strong year for M-I. And we're poised for it to be the best year we've ever had.

Speaker Change: is strong, our land position is strong.

Speaker Change: We're poised to increase community count.

Speaker Change: We're really optimistic about next year and what the future lies, but we've got a ways to get there yet. This is going to be a really strong year for M-I, and we're poised for it to be the best year we've ever had, and that's what we're focused on.

Bob: We're poised for it to be the best year we've ever had, and that's what we're focused on.

Alan Ratner: I appreciate your thoughts, and we agreed; definitely, the future is bright. On that note, you mentioned your liquidity. You did pick up the pace of buybacks this quarter, which was great to see. I know last quarter, you mentioned that you were having some conversations with the board about potentially picking up that pace. You did say this quarter 50 million, and yet your balance sheet is still in fantastic shape, negative net debt.

Alan S. Ratner: Great. I appreciate your thoughts. And we agree. Definitely. The future is bright.

Speaker Change: Great. I appreciate your thoughts. And, you know, we agree, definitely, the future is bright. So on that note, you know, you mentioned your liquidity, you did pick up the pace of buybacks this quarter, which is great to see. And I know last quarter, you kind of mentioned that you were having some conversations with the board about potentially

Alan S. Ratner: So on that note, you mentioned your liquidity. You did pick up the pace of buybacks this quarter, which is great to see. And I know last quarter, you kind of mentioned that you were having some conversations with the board about potentially picking up that pace. And you did so this quarter, $50 million, and yet your balance sheet is still in fantastic shape, negative net debt. So is this $50 million? Should we think about this as kind of a programmatic run rate going forward? Was it more kind of a one-off in nature? Where's your head at currently on the buyback?

Speaker Change: Picking up that pace and

Speaker Change: You did so this quarter, $50 million, and yet your balance sheet is still in fantastic shape, negative net debt. So is this $50 million? Should we think about this as kind of a programmatic run rate going forward? Was it more, you know, kind of one-off in nature? Where's your head at currently on the buyback?

Phil: Is this 50 million? Should we think about this as a programmatic run rate going forward? Was it more one-off in nature? Where's your head at currently on the buyback?

Phillip G. Creek: Phil will answer that one. (inaudible)

Phil: Phil will answer that one.

Phillip G. Creek: Yeah, our current view is that, as Bob said, there are always challenges in business. We do plan on opening a few more stores in the second half than we did in the first half, which is good news. We also plan on spending more on land in the second half than we did in the first half, but again, you know, with our backlog and feel good about our spec levels, I would see us continuing in the stock repurchase area, kind of where we are now in the near term.

Phil: Our current view is that, as Bob said, there's always challenges in business.

Speaker Change: Phil will answer that one.

Phil: Yeah, our current view is that, you know, as Bob said, there's always challenges in business.

Phil: We do plan on opening a few more stores the second half, and we did the first half, which is good news. We also plan on spending more on land; the second half, we did the first half, but again, with our backlog and feel good about our spec levels, I would see us continuing in the stock repurchase area where we are now in the near term. Again, that's dependent, longer term on the business and the economy, but we did go from 25 to 50, and I would kind of see us kind of staying there. We want to have somewhat a consistent policy and program, so I kind of see us staying there in the short term.

Speaker Change: We do plan on opening a few more stores the second half than we did the first half, which is good news.

Phil: We also plan on spending more on land the second half we did the first half.

Bob: But again, you know, with our backlog and...

Bob: I feel good about our spec levels.

Bob: I would.

Bob: See us continuing in the stock repurchase area, kind of where we are now, in the near term. Again, that's dependent, you know, longer term on the business and the economy. But, you know, we did go from 25 to 50, and I would kind of see us...

Phillip G. Creek: Again, that's dependent, you know, longer term on business and the economy, but, you know, we did go from 25 to 50, and I would kind of see us staying there. We want to have somewhat of a consistent policy and program. So yeah, I kind of see us staying there in the short term.

Bob: Kind of staying there. We want to have somewhat of consistent policy and program So yeah, I kind of see us staying there in the short term Alan

Alan Ratner: Alan. Appreciate that, guys. Thanks a lot.

Alan S. Ratner: I appreciate that, guys. Thanks a lot.

Operator: Thank you, Alan. Thank you.

Alan S. Ratner: Appreciate that, guys. Thanks a lot.

Operator: Thank you. The next question comes from Buckhorn at Raymond James. Please go ahead.

Buck Horne: Next question comes from Buck Horne at Raymond James.

Alan S. Ratner: Thank you, Alan.

Buck Horne: Please go ahead.

Speaker Change: Thank you. Next question comes from Buckhorn at Raymond James. Please go ahead.

Buckhorn: Hey, good morning, everybody, and congratulations. Thanks, Buck, and it's good to have you on the call. It's great to be here, so thank you. Thank you very much.

Buck Horne: Hey, good morning, everybody. I'm a great quarter. So, yeah, thanks. Thanks, Buck. It's good to have you on the call. That's great to be here, so thank you. Thank you very much.

Speaker Change: Hey, good morning, everybody, and congratulations on a great quarter. So, yeah, thanks. Thanks, Buck, and it's good to have you on the call.

Buckhorn: And I wanted to just maybe talk about your land strategy going forward here, as it looks like you've added quite a few lots under option contracts quarter over quarter, obviously still spending on some new acquisitions in the back half of the year. I guess I'm curious, just longer term, how you think about increasing your optioned lot percentage, maybe as kind of the overall total or how much land you want to keep under control? And maybe more broadly, what kind of pricing trends are you seeing in your markets for land and working with those developers and other land banks out there?

Buck Horne: I wanted to just maybe talk about your land strategy going forward here, as it looks like you've added quite a few lots under option contracts quarter over quarter. Obviously, still spending on some new acquisitions in the back half of the year. I guess I'm curious; you've longer term how you think about increasing your options lot percentage. Maybe is the overall total or how much land you want to keep under control. And maybe more broadly, what kind of pricing trends you're seeing in your markets for land and working with those developers and other land banks out there?

Buckhorn: It's great to be here. So thank you. Thank you very much.

Speaker Change: And I wanted to just maybe talk about your land strategy going forward here, as it looks like you've added quite a few lots under option contract quarter over quarter. Obviously, still spending on some new acquisitions in the back half of the year. I guess I'm curious, just longer term, how you think about increasing your, you know, options lot percentage. Maybe it's kind of, you know, the overall total or how much land you want to keep under control. And maybe more broadly, what kind of pricing trends you're seeing.

Speaker Change: in their markets for land and working with those developers and other land banks out there.

Bob: Yeah, great question. Our strategy with respect to land acquisition owned versus optioned honestly has not changed in a long, long time. At least 20 years, maybe longer. Our goal is to own and control a three to five-year supply of lots. Embedded in that, we do not want to own at any point in time more than a two to three-year supply. With our current run rate and owning around 25,000 lot or a lot of equivalents today, we're under that three-year sort of threshold that is our own internal regulator. We'd rather own less and control more, but we're also growing the business.

Robert H. Schottenstein: Yeah, great question. Our strategy with respect to land acquisition, owned versus optioned, honestly has not changed in a long, long time. At least 20 years, maybe longer.

Speaker Change: Yeah, great question.

Speaker Change: Our strategy with respect to land acquisition, owned vs. optioned,

Speaker Change: honestly has not changed in a long, long time.

Speaker Change: You know, at least 20 years, maybe longer. Our goal is to own and control.

Robert H. Schottenstein: Our goal is to own and control. 3 to 5 years supply a lot. [inaudible] Embedded in that, we do not want to own, at any point in time, more than a 2-3 year supply. With our current run rate and owning around 25,000 lots or lot equivalents today, we're under that three-year sort of threshold that is our own internal regulator. We'd rather own less and control more, but we're also... growing the business.

Speaker Change: A three to five year supply of lots.

Speaker Change: Embedded in that, we do not want to own at any point in time more than a two to three year supply.

Speaker Change: With our current run rate and owning around 25,000 lot or lot equivalents today, we're under that three-year sort of threshold that is our own internal regulator.

Speaker Change: We'd rather own less and control more, but we're also...

Robert H. Schottenstein: And we've talked about this in some of our previous conference calls or quarterly conference earnings calls, rather, that we're looking to grow the top line of the business by five to 10% a year over the next several years. And that is a goal of ours.

Bob: And we've talked about this in some of our previous conference or quarterly conference earnings calls, rather, that we're looking to grow the business top line by five to 10% a year over the next several years. And that is a goal of ours. Land is a precious commodity, arguably one of the most precious in our industry. There has clearly been land inflation rather on the development side over the last several years. That appears to be slowing somewhat, which is encouraging. On the other hand, for the prime locations, it will continue to be pricey for acquiring the A locations.

Speaker Change: Growing the business, and we've talked about this in some of our previous conference or quarterly conference earnings calls rather.

Speaker Change: that

Speaker Change: You know, we're looking to grow the business top line by 5-10% a year over the next several years. And that is a goal of ours. Land is a precious commodity, arguably one of the most precious in our industry.

Speaker Change: There has clearly been land inflation on the development side over the last several years. That appears to be slowing somewhat, which is encouraging.

Robert H. Schottenstein: Land is a precious commodity, arguably one of the most precious in our industry. There has clearly been land inflation, rather on the development side over the last several years. That appears to be slowing somewhat, which is encouraging.

Speaker Change: On the other hand, for the prime locations, it will continue to be pricey for acquiring the A locations.

Bob: And it's easy to say every builder wants A locations, but you've got to pay for A locations, or we're not shy about doing that. We'll continue to.

Speaker Change: It's easy to say every builder wants A-locations, but you've got to pay for A-locations, and we're not shy about doing that, and we'll continue to.

Robert H. Schottenstein: On the other hand, for prime locations, you know, it'll continue to be pricey to acquire the A locations. It's easy to say every builder wants A-locations, but you've got to pay for A-locations, and we're not shy about doing that, and we'll continue to do it. You know, there's a lot of things happening on the density side, which can help mitigate against escalating land costs, but a lot of that is dependent upon, you know, local zoning.

Bob: There's a lot of things happening on the density side, which can help mitigate against escalating land costs, but a lot of that is dependent upon local zoning. Right now, attached town homes, which on average produce densities in the 6 to 10 per acre range or higher, represent probably 20% of our business, whereas five years ago was less than 10. We're doing a lot more attached town homes in all of our markets right now in terms of affordability and trying to manage land use costs, or land costs, I should say. By the way, contrasted with average densities on single-family developments being anywhere from two to four units per acre, occasionally you'll get lucky and be slightly over four. But town home densities can be three to four to five times what single-family would be.

Speaker Change: You know there's there's a lot of things happening on the density side which can help mitigate against Escalating land costs, but a lot of that is dependent upon you know local zoning

Robert H. Schottenstein: Right now, attached townhomes, which on average produce densities in the 6 to 10 per acre range or higher, represent probably 20% of our business, whereas 5 years ago, it was less than 10. We're doing a lot more attached townhomes in all of our markets right now in terms of affordability and trying to manage land use costs, or land costs, I should say. By the way, contrasted with average densities on single-family developments being anywhere from two to four units per acre, occasionally you'll get lucky and be slightly over four, townhome densities can be three to four to five times what single-family would be.

Speaker Change: Right now, attached townhomes, which on average produce densities in the 6 to 10 per acre range or higher,

Speaker Change: Probably 20% of our business, whereas 5 years ago was less than 10.

Speaker Change: We're doing a lot more attached townhomes in all of our markets right now, in terms of affordability and trying to manage land use costs, or land costs, I should say.

Speaker Change: By the way, contrasted with average densities on single-family developments being anywhere from 2 to 4 units per acre, occasionally you'll get lucky and be slightly over 4, but townhome densities can be 3 to 4 to 5 times.

Bob: And so all that relates to end cost of a finished lot. But we've always been pretty consistent with this strategy. We essentially do no land banking other than with the seller. As Phil often says, the best land bankers in the salary; you can get them to hold till you're ready. We try to do that as much as possible. We have not engaged with institutional or so-called third-party land bankers. We know a lot of builders are. That doesn't seem to be too appealing to us at this point. Frankly, just like leaping big into the build for wholesale business was never big for us either.

Robert H. Schottenstein: So all that relates to the end cost of a finished lot. You know, we've always been pretty consistent with this strategy. We essentially do no land banking other than with the seller. As Phil often says, the best land banker is the seller. You can get them to hold until you're ready.

Speaker Change: What single family would be and so all that relates to end cost of a finished lot, but

Speaker Change: I, you know, I, we're, we've always been pretty consistent with this strategy. We essentially do no land banking other than with the seller.

Speaker Change: As Phil often says, the best land banker is the seller, you can get them to hold until you're ready. We try to do that as much as possible.

Phillip G. Creek: We try to do that as much as possible. For example, we have not engaged with institutional or so-called third-party land bankers. We know a lot of builders are. You know, leaping, you know, leaping big into the build for rent business was never big for us either. We try to focus on our core business and do what we think we know how to do, and that's sort of our approach. And Bob, this is Phil, just to add a couple of things. Like Bob said, we really focus on premier locations as much as we can, hopefully, the better school districts near the better shopping and near the better transportation.

Speaker Change: We have not engaged with institutional or so-called third-party land bankers. We know a lot of builders are. That doesn't seem to be too appealing to us at this point. Frankly, just like...

Speaker Change: You know, leaping big into the build for rent, wholesale business was never big for us either.

Bob: We try to focus on our core business and do what we think we know how to do, and that's sort of our approach.

Phil: We try to focus on our core business and do what we think we know how to do, and that's sort of our approach. And Bob, this is Phil, just to add a couple things in there. Like Bob said, we really focus on premier locations as much as we can, hopefully the better school districts near the better shopping, near the better transportation.

Phil: Buck, this is Phil. Just to add a couple of things in their life. Bob said, "We really focus on premier locations as much as we can." Hopefully the better school districts near the better shopping, near the better transportation. We think in really good times, those eight locations will sell really well, but we also think in difficult times they will still sell okay, so you can work through it. We strive to own a two to three-year supply, and inside that two to three-year, to have about a one-year supply of finished lots, so we don't go dark in community; you don't rely too much on, you know, outside developers and those type of things.

Phillip G. Creek: We think in really good times, those A locations will sell really well, but we also think in difficult times, they will still sell okay, so you can work through it. So we strive to own a two to three year supply, and inside that two to three years, to have about a one year supply of finished lots, so we don't go dark in communities or don't rely too much on, you know, outside developers and those type of things.

Bob: We think in really good times, those A locations will sell really well. But we also think in difficult times, they will still sell okay, so you can work through it.

Speaker Change: So we strive to own a 2-3 year supply and inside that 2-3 year to have about a 1 year supply of finished lots.

Speaker Change: So we don't go dark in communities or don't rely too much on, you know, outside developers and those type of things. Today we develop about 80% of our own sites.

Phil: Today we develop about 80% of our own sites, which has been a little higher than in the past. As far as off-balance, you look today, we have about 26,000 lots off the books under option. The value of that is about a billion four. Again, a lot of that's raw. It's about a billion four, and as far as risk dollars, we have risk dollars of about 90 million of that, which is about 7% of the value. So again, we have about 7% of that lot value at risk. Again, you know, we try to get terms with the sellers as it makes sense, but we feel very good about where we are.

Phillip G. Creek: Today we develop about 80% of our own site. We've just been a little higher than in the past, and as far as off-balance sheet, you know, you look today. We have about 26,000 lots off the books under option. The value of that's about $1.4 billion. Again, a lot of that's raw.

Speaker Change: Which has been a little higher than in the past. And as far as off balance sheet, you know, you look today, we have about 26,000 lots off the books under option. The value of that is about $1.4 billion.

Phillip G. Creek: It's about $1.4 billion. And as far as risk dollars are concerned, we have risk dollars of about $90 million of that, which is about 7% of the value. So again, we have about 7% of that lot value at risk. Again, we try to get terms with the sellers as it makes sense.

Speaker Change: Again, a lot of that's raw. It's about $1.4 billion. And as far as risk dollars, we have risk dollars of about $90 million of that, which is about 7% of the value.

Speaker Change: So again, we have about 7% of that lot value at risk. Again, you know, we try to get terms with the sellers as it makes sense.

Phillip G. Creek: But we feel very good about where we are. Our current closing rate is about 9,000 units a year. So owning less than 27,000, which is where we are now, we feel really good about that. And again, this year we're gonna open about 80 new stores. Last year we opened 76. We feel good about that. We are working through stores a little faster than we thought, and that's why it's brought our average community count run rate down to maybe 5% this year.

Phil: You know, our current closing rate is about 9,000 units a year, so owning less than 27,000, which is where we are now. We feel really good about that.

Speaker Change: We feel very good about where we are. Our current closing rate is about 9,000 units a year.

Speaker Change: So owning less than $27,000, which is where we are now, we feel really good about that. And again, you know, this year we're going to open about 80 new stores. Last year we opened 76.

Phil: And again, you know, this year we're going to open about 80 new stores. Last year we opened 76. We feel good about that. We are working through stores a little faster than we thought, and that's brought our average community count run rate down to maybe 5% this year. We thought it would be more like 10% the first of the year. But we're always concentrating on the location. The quality of the community sales pace is very, very important to us. But overall, we feel like we're in really good shape.

Speaker Change: We feel good about that. We are working through stores a little faster than we thought, and that's why it's brought our average community count run rate down to maybe 5% this year. We thought it would be more like 10% the first of the year.

Phillip G. Creek: We thought it would be more like 10% at first. But we're always concentrating on the location, the quality of the community, and the sales pace is very, very important to us, but overall, we feel like we're in really good shape.

Speaker Change: But we're always concentrating on the location, the quality of the community, sales pace is very, very important to us. But overall, we feel like we're in really good shape.

Buck Horne: That was an exceptionally thorough and really impressive answer. So thanks for all the details on that question.

Buckhorn: That was an exceptionally thorough and really impressive answer, so thanks for all the details on that question. Second quick follow-up, just thinking about the resale inventory situation in your markets as it varies, because you're exposed to some markets that both, you know, have quite a year-over-year increase in resale inventory but several others, you know, particularly in those Ohio markets where inventory remains very, very tight near historic lows. I'm just wondering if you can maybe highlight that. Does that play out in terms of the level of incentives you're offering in the different regions and different markets? You know, what's the, what does it take to incentivize and sell a house in the northern markets versus the southern markets right now?

Speaker Change: That was an exceptionally thorough and really impressive answer, so thanks for all the details on that question.

Buck Horne: So second, quick follow up. Just thinking about the resale inventory situation in your market, does it vary because you're exposed to the markets that both, you know, have quite a year of your increase in resale inventory. But several others, you know, particularly kind of in the those Ohio markets where inventory remains very, very tight, near historic lows.

Speaker Change: Second quick follow up, just thinking about the resale inventory situation in your market does it vary because you're exposed to some markets.

Speaker Change: that both, you know, have quite a year-over-year increase in resale inventory, but several others, you know, particularly kind of in those Ohio markets where inventory remains very, very tight near historic lows. I'm just wondering if you can maybe highlight...

Buck Horne: I'm just wondering if you can maybe highlight. Is that, you know, does that play out in terms of the level of incentives you're offering in the different regions and different markets? You know, what's the, what does it take to incentivize and sell a house in the northern markets versus the southern markets right now?

Speaker Change: Does that play out in terms of the level of incentives you're offering in the different regions and different markets? What does it take to incentivize and sell a house in the northern markets versus the southern markets right now?

Bob: You know, first let me make a comment about inventory. Clearly, we've seen a pretty noticeable increase, particularly in Florida. Some of the Texas markets have jumped up quite a bit as well. Keep in mind that some of that inventory is builder specs, not with not your traditional used home listings. Increasingly, builder specs, which for many years, going back maybe a decade or so, didn't really show up in the MLS listings, now we're in there. So it's not all just used homes. A lot of it is us offering our specs, with builders building more specs now than ever before.

Robert H. Schottenstein: You know, uh... First, let me make a comment about inventory. Clearly, we've seen a pretty noticeable increase, particularly in Florida. Some of the Texas markets have jumped up quite a bit as well. But keep in mind that some of that inventory is builder specifications, not your traditional used home listings. Increasingly, builder specifications, which for many years, going back maybe a decade or so, didn't really show up in the MLS listings, are now there.

Speaker Change: First, let me make a comment about inventory. Clearly, we've seen a pretty noticeable increase, particularly in Florida.

Speaker Change: Some of the Texas markets have jumped up quite a bit as well.

Speaker Change: Keep in mind that some of that inventory is builder specs, not your traditional used home listings.

Speaker Change: Increasingly, builder specs, which...

Speaker Change: For many years, going back maybe a decade or so, didn't really show up in the MLS.

Robert H. Schottenstein: So it's not all just used homes. A lot of it is us offering our own specifications, with builders building more specifications now than ever before. But frankly, we haven't seen much of that impact our use of incentives. There are very few markets where we haven't had to incentivize. 70% of our buyers are utilizing below-market financing. It's the same in Minneapolis, Chicago, and Columbus as it is in Tampa, and Raleigh, and Dallas. And there's not really a discernible difference between any of those.

Speaker Change: and the MLS listings, now we're in there. So...

Speaker Change: It's not all just used homes. A lot of it is us offering our specs with builders building more specs now than ever before.

Bob: But frankly, we haven't seen much of that impact our use of incentives. There's very few markets where we haven't had to incend; 70% of our buyers are utilizing below market financing. It's as much in Minneapolis, Chicago, and Columbus as it is in Tampa and Raleigh and Dallas. And there's not really a discernible difference between any of those. By historical standards, inventory levels in most of our markets are still very manageable. And while it's something we watch very carefully monthly, you know, we're not going to ignore it, but I don't consider it a serious issue at this point by any means.

Speaker Change: But frankly, we haven't seen much of that impact.

Speaker Change: Our use of incentives.

Speaker Change: There's very few markets where we haven't had to incent.

Speaker Change: 70% of our buyers are utilizing below-market financing.

Robert H. Schottenstein: By historical standards, inventory levels in most of our markets are still very manageable. And while it's something we watch very carefully monthly, we're not going to ignore it, but I don't consider it a serious issue at this point by any means.

Speaker Change: By historical standards, inventory levels in most of our markets are still very manageable. And while it's something we watch very carefully monthly, we're not going to ignore it, but I don't consider it a serious issue at this point by any means.

Buck Horne: All right, great. Thanks, guys.

Buckhorn: All right, great. Thanks guys. Congratulations and good luck. Thank you.

Operator: Congrats and good luck.

Operator: Thank you. Thanks.

Speaker Change: All right, great. Thanks, guys. Congrats and good luck. Thank you. Thanks.

Operator: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star one.

Operator: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star 1. The next question comes from Jay McCanless from Whitebush. Please go ahead. Hey, good morning, everyone.

Speaker Change: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star 1.

Jay Mccanless: Next question comes from Jay McCannis from Whitbush. Please go ahead. Hey, good morning, everyone. Good morning, Jay.

Speaker Change: Next question comes from Jay McCanless from Wetbush. Please go ahead.

Jay McCanless: Hey, good morning, everyone. So, to follow up on Buck's question. Morning, Bob. Could you talk about what the gross margin differential is between your northern segment and your southern segment?

Jay Mccanless: Welcome back to question more about pop on bucks question. Can you talk about what the gross margin differential is between your northern segment and your seven segment? I don't know that I have that specifically in front of me at this point, Phil. We've never really given that kind of specific guidance. I mean, it's really, it's a bit of a mixed bag. I will tell you that if you look at, I'll try to answer it this way. If you take the top six performing divisions on gross margin, one or two are in Texas, one or two are in the Carolinas, one or two are in Florida, and one or two are in the Midwest.

Jay McCanless: Hey, good morning everyone. So, follow up on Buck's question. Good morning Bob. Follow up on Buck's question. Could you talk about what the gross margin differential is between your northern segment and your southern segment?

Phillip G. Creek: I don't know that I have that specifically in front of me at this point, Phil. We've never really given that kind of specific guidance. I mean, it's really, it's a bit of a mixed bag. I will tell you that if you look at, I'll try to answer it this way, if you take the top six performing divisions on gross margin, one or two are in Texas, and one or two are in the Carolinas. One or two are in Florida, and one or two are in the Midwest.

Speaker Change: I don't know that I have that.

Speaker Change: specifically in front of me at this point, Phil, that we've never really given that kind of specific guidance. I mean, it's really, it's a bit of a mixed bag. I will tell you that if you look at.

Speaker Change: I'll try to answer it this way. If you take the top six performing divisions on gross margin,

Speaker Change: One or two are in Texas, one or two are in the Carolinas.

Phillip G. Creek: The issue, Jay, you know, is really...

Bob: The issue, Jay, you know, it's pretty much a lot of, sorry, Phil, let me just say this. A lot of that relates to the strength of our operation, the quality of our communities. It's more about that than it is about, you know, Ohio versus, you know, Florida. It really does fall down to me.

Speaker Change: One or two are in Florida, and one or two are in the Midwest. The issue, Jay, you know... Pretty much, a lot of... Sorry, Phil, let me just say this. A lot of it relates to the strength of our operation and the quality of our communities.

Robert H. Schottenstein: Pretty much, a lot of it relates to the strength of our operation, the quality of our community. It's more about that than it is about, you know, Ohio vs.

Jay: It's more about that than it is about, you know, Ohio versus, you know, Florida. It really does boil down to, I mean, we are in the subdivision business.

Phillip G. Creek: It really does boil down to, I mean, we are in the subdivision business. And we, right now, today, and things are always different with seven, we have a couple of divisions that have a couple of great stores that are doing... 5, 8, 10 a month at exceptional margins, and that just puts a lot of money on the bottom line. All I can tell you is that in the last couple of years, you know, when things were really hot, certain markets, Texas, Florida, the Carolinas, in general, were really hot, and the Midwest wasn't so hot.

Bob: We are in the subdivision business, and right now today, things are always different from the 17 divisions. We have a couple of divisions that have a couple of great stores that are doing. 5, 8, 10 a month at exceptional margins, and that just puts a lot of money in the bottom line. But all I can tell you is the last couple years, you know, when things were really hot, certain markets, Texas, Florida, the Carolinas, and Jen were really hot in the Midwest wasn't so hot. And then in other times in our operations, the Midwest has the best margins.

Speaker Change: And we, right now, today, and things are always different with 17 divisions, we have a couple of divisions that have a couple of great stores that are doing...

Speaker Change: 5, 8, 10 a month at exceptional margins, and that just puts a lot of money in the bottom line.

Speaker Change: All I can tell you is the last couple of years, you know, when things were really hot, certain markets, Texas, Florida, the Carolinas in general were really hot and the Midwest wasn't so hot. And then there were times in our operations that the Midwest has the best margins.

Phillip G. Creek: And then there were times in our operations when the Midwest had the best margins. So it just kind of really depends on the markets in general and the stores we have open. But overall, we're just really pleased, you know, with our margins and our returns. We focus very much on that, as you know.

Bob: So it just kind of really depends on markets in general in the stores we have.

Bob: But overall, we're just really pleased, you know, with our margins and our returns. We focus very much on that, as you know.

Speaker Change: So it just kind of really depends on markets in general and the stores we have open.

Speaker Change: Overall, we're just really pleased with our margins and our returns. We focus very much on that, as you know.

Phil: Right, and then lead to my second question, which, you know, 27.9 is pretty unimpressive, but how sustainable do you think this is going to be, especially in light of what you said earlier, Bob, the incentive levels probably don't come down from here. How sustainable do you think that that number is going into the back after the year? I mean, that's a hard number to answer because, like I said in my comments, 30% of our closings sold and closed in the quarter. And in general, what happens is the incentives tend to be a little higher, you know, on inventory that you're trying to move through the system.

Phillip G. Creek: And that leads into my second question, which, you know, 27.9 is pretty darn impressive, but how sustainable do you think this is going to be, especially in light of what you said earlier, Bob, that incentive levels probably won't come down from here? How sustainable do you think that number is going into the back half of the year? I mean, it's a hard number to answer because, like I said in my comments, 30% of our closings sold and closed in the quarter.

Speaker Change: And that leads into my second question, which, you know...

Speaker Change: 27.9 is pretty darn impressive, but how sustainable do you think this is going to be? Especially in light of what you said earlier, Bob, that incentive levels probably don't come down from here. How sustainable do you think that number is going into the back half of the year?

Bob: I mean, it's a hard number to answer because, like I said in my comments, 30% of our closings sold and closed in the quarter. And in general, what happens is the incentives tend to be a little higher, you know, on inventory that you're trying to move through the system.

Phillip G. Creek: And in general, what happens is the incentives tend to be a little higher, you know, on inventory that you're trying to move through the system. But, you know, the backlog today isn't hardly any different than it was. Three months ago, as far as the backlog margins and so forth, it was very hard to find these locations. Get everything zoned, approved, developed, and community open, you know. We're not a volume-first driven company as some of our competition is.

Phil: But, you know, the backlog today isn't hardly any different than it was three months ago, as far as the backlog margins and so forth. It's very hard to find these locations, get everything zoned to prove, develop, community open. You know, we're not a volume-first driven company as some of our competition is. So every subdivision is different; you know, we can't do what we need to do to get a certain amount of volume through communities. But we were very surprised; our second quarter margins were better than our first. Yeah, and the only thing I'd add, another way to ask that question. I don't mean to put words in your mouth, Jay.

Bob: But, you know, the backlog today isn't hardly any different than it was.

Bob: Three months ago, as far as the backlog margins and so forth, it's very hard to find these locations.

Bob: Get everything zoned, approved, developed, community open. You know, we're not a volume-first driven company, as some of our competition is.

Phillip G. Creek: So, every subdivision is different, you know; we kind of do what we need to do to get a certain amount of volume through communities. But we were very surprised that our second quarter margins were better than our first.

Bob: So, every subdivision is different, you know, we kind of do what we need to do to get a certain amount of volume through communities.

Bob: But we were very surprised our second quarter margins were better than our first. Yeah, and the only thing I'd add, another way to ask that question, I don't mean to put words in your mouth, Jay, but another way to ask that question would be, how sustainable are 17.5% pre-tax margins?

Robert H. Schottenstein: And the only thing I'd add, another way to ask that question, I don't mean to put words in your mouth Jay, but another way to ask that question would be, how sustainable are 17.5% pre-tax margins? Because that's where we are right now. I hope they're sustainable for the next several years, but even if they dropped a little bit down to 16 or 15, we'd still be better than most, if not almost all, the other builders right now.

Bob: But another way to ask that question was big, how sustainable are 17.5% pre-tax margins? That's where we are right now. And I hope they're sustainable for the next several years, but you know, even if they dropped a little bit down to 16 or 15, we'd still be better than most. If not almost all the other builders right now, there's only two or three builders whose pre-tax margins are at our level or above. And many are below 15 today. And so we don't want ours to drop, but I think our margins over the last number of years have compared very favorably with our peers.

Jay: Because that's where we are right now.

Jay: I hope they're sustainable for the next several years.

Jay: But, you know, even if they dropped a little bit, down to 16 or 15, we'd still be better than most.

Robert H. Schottenstein: There are only two or three builders whose pre-tax margins are at our level or above, and many are below 15 today, and so we don't want ours to drop, but I think our margins over the last number of years have compared very favorably with our peers, and I believe they'll continue. That's the best way I can answer that.

Jay: If not...

Speaker Change: Almost all the other builders right now, there's only two or three builders whose pre-tax margins are at our level or above.

Speaker Change: and many are below 15 today and so we don't want ours to drop but I think ours I think our margins over the last number of years have compared very favorably with our peers.

Bob: And I believe they'll continue to. That's the best way I can answer that.

Speaker Change: And I believe they'll continue to.

Phil: And a big impact also, Jay, is the new stores. Like we said, we opened 38 new stores the first half. We opened 76 new stores last year, and we intend to open more than 38 new stores in the second half. And a lot of the impact of your expense levels, giving those stores open, and also your margins. I mean, hopefully we're opening the right way and don't get too far ahead of ourselves and get off on the right foot. But there's just a lot of moving parts to that.

Phillip G. Creek: And a big impact also, Jay, is the new stores. Like we said, we opened 38 new stores in the first half. We opened 76 new stores last year, and we intend to open more than 38 new stores in the second half. And a lot of the impact of your expense levels, getting those stores open, and also your margins. I mean, hopefully, we're opening the right way and don't get too far ahead of ourselves and get off on the right foot. But there's just a lot of moving parts to that.

Speaker Change: That's the best way I can answer that. And a big impact also, Jay, is the new stores. Like we said, we opened 38 new stores the first half.

Speaker Change: We opened 76 new stores last year, and we intend to open more than 38 new stores in the second half. And a lot of the impact of your expense levels, getting those stores open, and also your margins. I mean, hopefully we're opening the right way.

Speaker Change: And don't get too far ahead of ourselves and get off on the right foot, but there's just a lot of moving parts to that.

Jay McCanless: And then the next question I had, in terms of G&A dollars, a little higher than we were expecting this quarter. What should we think about as a good quarterly run rate for that, especially with the increase in community count you guys were talking about?

Jay Mccanless: And then the next question I had in terms of $GNA, well, higher than we were expecting this quarter. What should we think about as a good quarterly run rate for that, especially with the increase in community count you guys were talking about? Well, when you look at it, I do have about 10% more people today than a year ago. You know, I have more stores than I had a year ago. Our stunning expenses on the variable side are a little higher than a year ago. So we were a little disappointed with our S-GNA in the second quarter.

Speaker Change: Got it. And then the next question I had in terms of G&A dollars, a little higher than we were expecting this quarter. What should we think about as a good quarterly run rate for that, especially with the increase in community count you guys were talking about?

Phillip G. Creek: Well, when you look at it, I do have about 10% more people today than a year ago. You know, I have more stores than I did a year ago. Our selling expenses on the variable side are a little higher than a year ago. So, we were a little disappointed with our SG&A in the second quarter. You know, I was sure hoping it would be a little bit less than last year. It gets back to the old saying, you don't want expenses growing faster than revenue. But I would imagine I'll kind of stay kind of where I am, Jay, as far as the percentage and so forth in that 11%.

Speaker Change: Well, when you look at it, I do have about 10% more people today than a year ago.

Speaker Change: You know, I have more stores than I had a year ago. Our selling expenses on the variable side are a little higher than a year ago.

Speaker Change: So we were a little disappointed with our SG&A in the second quarter, you know, I was sure hoping to be a little bit less than last year. Gets back to the old saying, you don't want expenses growing faster than revenue.

Phil: You know, I wish you're hoping to be a little bit less than last year. It's back to the old thing. You don't want expenses growing faster than revenue. But I would imagine I'll kind of stay kind of where I am, Jay, as far as the percentage and so forth in that 11% range.

Speaker Change: But I would imagine I'll kind of stay kind of where I am, Jay, as far as the percentage and so forth in that 11% range.

Jay Mccanless: And then could you talk about pricing power during the quarter, maybe what percentage of communities you're able to raise price or hold price during the quarter? I don't have an exact percentage. My sense is that because of the softness, the second quarter being slightly softer than the first, that very few communities do we raise prices. There might have been, you know, a handful. Most either we kept the same. There might have been a few. Probably as many that we raised is that we lowered. My guess is that 80% or so stayed the same. And on the fringes, there might have been a few that we raised or a few that we had to lower, given the slight softening in the mid.

Jay McCanless: And then could you talk about pricing power during the quarter, maybe what percentage of communities you're able to raise prices or hold prices during the quarter?

Jay: And then, could you talk about pricing power during the quarter? Maybe what percentage of communities you're able to raise price or hold price during the quarter?

Robert H. Schottenstein: I don't have an exact percentage, but my sense is that because of the softness, the second quarter being slightly softer than the first.

Speaker Change: I don't have an exact percentage. My sense is that

Speaker Change: Because of the softness.

Speaker Change: The second quarter being slightly softer than the first.

Phillip G. Creek: Very few communities do we raise prices. There might have been, you know, a handful. Most either we kept the same; there might have been a few. There were probably as many that we raised as that we lowered. My guess is that 80% or so stayed the same, and on the fringes, there might have been a few that we raised or a few that we had to lower given the slight softening in demand.

Speaker Change: Very few communities did we raise prices. There might have been, you know, a handful.

Speaker Change: Most either we kept the same, there might have been a few, probably as many that we raised as that we lowered. My guess is that 80% or so stayed the same, and on the fringes there might have been a few that we raised or a few that we had to lower, given the slight softening in demand.

Jay McCanless: And also, as I mentioned, our construction costs were pretty much flat in the second quarter versus the first. We did get about 10 days improvement in cycle time, so we are working on all the things we can, you know, to continue helping our return.

Bob: And also the good thing is I mentioned our construction cost or pretty much flat the second quarter versus the first. We did get about 10 days' improvement in cycle time. So we are working on all the things we can, you know, to continue helping our returns.

Speaker Change: And also the good thing, as I mentioned, our construction costs were pretty much flat the second quarter versus the first. We did get about 10 days improvement in cycle time, so we are working on all the things we can, you know, to continue helping our returns.

Jay Mccanless: Yeah, and that's in my way. That was going to be my last question.

Jay McCanless: Yeah, and that's in my lab. That was gonna be my last question. Could you talk about what you're seeing in terms of lumber prices? Is that a tailwind? And then also, maybe, what you're hearing on labor?

Bob: Just could you talk about what you're seeing in terms of lumber prices? Is that a tailwind, and then also maybe what you're hearing on labor? Well, lumber prices have, you know, have moved in the right direction for our industry, clearly. That's a good thing. You know, total total hard cost during the quarter. They're pretty much a push; every market's a little bit different. You know, we just got through having detailed revised budget discussions with all of our division leadership teams, which included all of our purchasing heads and so forth. But overall it kind of looks like things are a push, you know, as Bob said, we're doing more attached townhouses.

Speaker Change: Yeah, and that's going to be my last question. Could you talk about what you're seeing in terms of lumber prices? Is that a tailwind? And then also maybe what you're hearing on labor.

Robert H. Schottenstein: Well, lumber prices have, you know, moved in the right direction for our industry, clearly. That's a good thing. You know. Total, total hard costs during the quarter.

Speaker Change: Well, lumber prices have moved in the right direction for our industry, clearly. That's a good thing.

Phillip G. Creek: Please see the complete disclaimer at https://sites.google.com detailed revised budget discussions with all of our division leadership teams, which included all of our purchasing heads and so forth. But overall, it kind of looks like things are a push. You know, as Bob said, we're doing more attached townhouses; we're doing more smaller single-family detached homes. You know, our average sale price has pretty much been flat. We're trying to deal with affordability as best we can.

Speaker Change: You know...

Speaker Change: Total hard costs during the quarter. They're pretty much a push. Pretty much a push. Every market's a little bit different. You know, we just got through having...

Speaker Change: detailed revised budget discussions with all of our division leadership teams which included all of our purchasing heads and so forth but overall it kind of looks like things are a push you know as Bob said we're doing

Bob: We're doing more smaller single family detached. You know, our average sale price is pretty much been flat. You know, we're trying to deal with affordability as best we can. We're not anticipating and really never do getting any benefit from lower cost land development; costs continue to go up, but not at the double-digit level they have been going up the last few years. So that's helping us. But we're not counting on cost reductions to really help us that much. That sounds great.

Bob: We're doing more attached townhouses, we're doing more smaller single-family detached. You know, our average sale price has pretty much been flat. You know, we're trying to deal with affordability as best we can. We're not anticipating and really never do getting any benefit from lower cost.

Phillip G. Creek: We're not anticipating and really never get any benefit from lower costs. Land development costs continue to go up, but not at the double-digit level they have been going up the last few years. So that's helping us some, but we're not counting on cost reductions to really help us that much, Jay.

Bob: Land development costs continue to go up, but not at the double digit level they have been going up the last few years. So that's helping us some, but we're not counting on cost reductions to really help us that much, Jay.

Jay McCanless: That sounds great. Thanks, guys.

Jay Mccanless: Thanks, yes. Thank you.

Operator: Thanks.

Jay: That sounds great. Thanks, guys.

Operator: Thank you.

Operator: Thank you. The next question comes from Alec Barron at the Housing Research Center. Please go ahead.

Alec Barron: Next question comes from Alec Baron at Housing Research Center. Please go ahead. Thanks, guys, and congratulations on the results. Going back to the FGNA, was there any one-time item, or is this kind of a run rate of 64 million corporate expense? No, Alex, there's not anything really unusual in there; it's just a combination of 10% more people because we're opening more stores and obviously planning on continuing our growth next year. It's just a combination of all those things: more stores and more people and a little more selling expense.

Jay: Thank you. Thanks.

Speaker Change: Thank you. Next question comes from Alec Barron at Housing Research Center. Please go ahead.

Alex Barron: Thanks guys and congratulations on the results. You're welcome. Going back to the SG&A, was there any one-time item, or is this kind of a run rate to 64 million corporate expenses?

Alex Barron: Thanks guys and congratulations on the results.

Alex Barron: You're welcome. Going back to the SG&A, was there any one-time item or is this kind of a run rate to 64 million corporate expense?

Phillip G. Creek: No, Alex, there's not anything really unusual about it. It's just a combination of, you know, 10% more people because we're opening more stores. Obviously, we plan on continuing our growth next year. Just a combination of all those things, more stores and more people and a little more selling expense.

Speaker Change: No Alex, there's not anything really unusual in there. It's just a combination of, you know, 10% more people, you know, because we're opening more stores.

Speaker Change: Obviously plan on continuing our growth next year, just a combination of all those things, more stores and more people and a little more selling expense.

Phil: Got it. And as far as the build time, you mentioned that you cut down 10 days, but can you tell us from what to what? Like, what's the current build time, and how much more do you think you can push it? I think it, I can tell you this, I think we're probably about at, you know, near max, we're, we're at or below pre-COVID levels in nearly every single one of our markets. We've actually improved in some markets from pre-COVID. I don't know how many more days we could sneak out of it, but right now, in the vast majority of our divisions, our construction efficiencies are at a very high level and a very, very acceptable level.

Alex Barron: Got it. And then as far as the build time, you mentioned that you cut it down by 10 days, but can you tell us from what to what? Like, what's the current build time and how much more do you think you can push it?

Speaker Change: As far as the build time, you mentioned that you cut down 10 days, but can you tell us from what to what? Like, what's the current build time and how much more do you think you can push it?

Robert H. Schottenstein: I think it, I can tell you this, I think we're probably about at, you know, near the max. We're, we're, we're at or below pre-COVID levels in nearly every single one of our markets. We've actually improved in some markets from pre-COVID. I don't know how many more days we can sneak out of it. But right now, in the vast majority of our division, our construction efficiencies are at a very high level and a very acceptable level.

Speaker Change: I think it, I can tell you this, I think we're probably about at, you know...

Speaker Change: We're at or below pre-COVID levels in nearly every single one of our markets. We've actually improved in some markets from pre-COVID. I don't know how many more days we could sneak out of it, but right now, in the vast majority of our divisions,

Speaker Change: Our construction efficiencies are at a very high level and a very acceptable level.

Phil: But in, in absolutes, is it like four months, something in that ballpark? Yeah, average right now, average right now is about 140. Yeah, but some markets were in the 110s, 107s, 105s, where we do, you know, maybe more smart series and markets where we have more towns, you'll see. There can be some pretty big variations from market to market. Yeah, we actually have templates for each of our product lines. And again, his Bob said that varies by market also, but, but overall today we're like about 140.

Alex Barron: But in absolute terms, is it like four months, something in that ballpark?

Phillip G. Creek: Average right now is about 140. Yeah, but in some markets we're in the 110s, 107s, 105s, where we do, you know, maybe more smart series and in markets where we have more towns, you'll see there can be some pretty big variations from market to market. Yeah, we actually have templates for each of our product lines, and again, as Bob said, that varies by market also, but overall, we're like about

Speaker Change: But in absolutes, is it like four months, something in that ballpark?

Speaker Change: average right now is about 140. Yeah, but some markets we're in the 110s, 107s, 105s where we do, you know, maybe more smart series and in markets where we have more towns you'll see there can be some pretty big variations from market to market. Yeah, we actually have templates for each of our product lines.

Speaker Change: And again, as Bob said, that varies by market also, but overall today we're like about $140,000.

Phil: If I could ask one more, in terms of spec versus build to order, like what percentage are you guys at right now? We're about 60% spec right now.

Alex Barron: Got it. If I could ask one more question, in terms of spec versus built to order, like, what percentage are you guys at right now?

Speaker Change: Got it. If I could ask one more. In terms of spec versus build to order, like what percentage are you guys at right now?

Phillip G. Creek: We're about 60% spec right now. Okay.

Alec Barron: Okay, thanks, guys, and best of luck. Thanks so much.

Alex Barron: Okay. Thanks, guys, and best of luck.

Speaker Change: We're about 60% spec right now.

Speaker Change: Okay. Thanks, guys, and best of luck.

Operator: Thank you. That is all the questions we have.

Operator: Thank you. That's all the questions we have. I will turn the call back over to Phil Creek for closing comments.

Speaker Change: Thanks so much.

Phil: I will turn the call back over to Phil Creek for closing comments. Thank you for joining us. Look forward to talking to you next quarter.

Speaker Change: Thank you. That is all the questions we have. I will turn the call back over to Phil Creek for closing comments.

Phillip G. Creek: Thank you for joining us. I look forward to talking to you next quarter.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines. Thank you.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

Phillip G. Creek: Ladies and gentlemen, this concludes the conference for today. We thank you for participating and we ask that you please disconnect your lines.