Q1 2025 M/I Homes Inc Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, and welcome to the M.I Homes First Quarter earnings conference call. At this time, our lines are in a listen-only mode. Following the presentation, we'll conduct a question and answer session.
Speaker Change: But anytime during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, April 23, 2025. I would now let you turn the conference over to Mr. Phil Creek. Please go ahead.
Speaker Change: Thank you for joining us. With me on the call is Bob Schottenstein, our CEO and President and Derek Klutch President of our mortgage company.
Speaker Change: First, to address regulation fire disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly.
Speaker Change: 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.
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, everyone, and thank you for joining us.
Bob Schottenstein: In the first quarter dominated by rapidly changing and mostly challenging macroeconomic conditions, M.I Homes posted very solid results.
We appreciate the opportunity to share our results with you.
Bob Schottenstein: Before we do, however, I want to address more specifically the macro environment and how it has impact to the housing industry and our business.
When we last spoke sharing our 2024 year end record-setting results
Bob Schottenstein: We commented then on the changing economic conditions and demand challenges we faced, particularly during the third and fourth quarters of last year when mortgage rates began to rise.
Bob Schottenstein: As demand for housing became more uneven during last year's fourth quarter, the need for such rate-by-downs became an even more important part of our sale strategy, carefully utilized by us on a subdivision by subdivision basis.
to try and maximize both volume and margins.
Bob Schottenstein: Throughout the spring-selling season, unless and until, it became clear that consistent and solid demand had returned.
Clearly, that has not happened.
Bob Schottenstein: Instead, what we have seen is the continuation of choppy and challenging conditions.
Clearly this has been a period marked by uncertainty.
Bob Schottenstein: A volatile stock market, the back-and-forth with retin tariffs, concerns with inflation, interest rate fluctuations, mostly going up, talk of a recession, and not surprisingly, a decline in consumer confidence.
Bob Schottenstein: While new contracts were down 10% compared to last year, we believe we were effective in balancing pace and price, as our gross margins were strong 25.9%.
Bob Schottenstein: A sequential improvement over 2024's fourth quarter, reflecting some pricing power in the first quarter, as well as the positive impact of select new communities.
Bob Schottenstein: But margins were down 120 basis points from last year's first quarter.
Bob Schottenstein: Given the need to continue using rate-by-downs for the foreseeable future, our gross margins will likely be under some pressure as we move through the year and continue to be below 20-24's full-year margins of 26.6%.
Bob Schottenstein: 54% of our buyers are now using our rate buy downs compared to just under 50% during last year's fourth quarter.
Bob Schottenstein: That said, the credit quality of our buyers continues to be strong, with average credit scores of $7.46 and average down payments of 17% or nearly $90,000.
Bob Schottenstein: Homes delivered during the quarter decreased by 8% to 1,976 Homes, and revenues decreased by 7% to $976 million.
Bob Schottenstein: We ended the quarter with a record 226 communities and remain on track to grow our community count in 2025 by an average of 5 percent.
Bob Schottenstein: With regard to our markets, our division income contributions in the first quarter were led by Dallas, Chicago, Columbus, Charlotte and Minneapolis.
Bob Schottenstein: New contracts for the first quarter in our northern region decreased by 8%. New contracts in our southern region decreased by 11% compared to last year's first quarter.
Bob Schottenstein: Our deliveries in the southern region decrease 13% and our deliveries in the northern region decreased by 2% from a year ago.
Bob Schottenstein: 58% of our deliveries come out of the southern region, the other 42% out of the northern region.
Bob Schottenstein: 32% of our owned and controlled lots are in our northern region, the other 60% in our southern region.
Bob Schottenstein: In addition, we control approximately 26,000 additional lots via option contracts resulting at a total of 51,100 owned and controlled lots equating to about a five-year supply.
Bob Schottenstein: With respect to our balance sheet, we ended the first quarter of 2025 with the strongest balance sheet in company history.
Bob Schottenstein: With all-time record $3 billion of equity, equating to a book value per share of $112.
Bob Schottenstein: down from 21% a year ago, and a net debt-to-capital ratio of negative 3%.
As I conclude,
Bob Schottenstein: Despite the short-term volatility and many market uncertainties, we remain very optimistic about our business.
Bob Schottenstein: and believe over the long-term, the home-building industry will continue to benefit from an under-supply of homes as well as growing household formations throughout our 17 markets.
Bob Schottenstein: We are well positioned as we begin the second quarter of 25 and expect to have a solid year in 2025.
Bob Schottenstein: And with that, I'll turn it over to Phil. Thanks, Bob. Our new contracts were down 10% when compared to last year. They were down 20% in January , down 10% in February , and down 2% in March. And our cancellation rate for the first quarter was 10%.
Bob Schottenstein: 50% of our first quarter sales were to first-time buyers and 65% were inventory homes.
Bob Schottenstein: Our community count was 226 at the end of the first quarter, compared to 219 a year ago. The breakdown by the region is 98 in the northern region and 128 in the southern region.
Bob Schottenstein: We delivered 1,976 homes in the first quarter, delivering 78% of our backlog, and about 35% of our first quarter deliveries came from inventory homes that were so and delivered in the quarter.
Bob Schottenstein: And in March 31st, we had 4,800 homes in the field, versus 4,500 homes in the field a year ago.
Bob Schottenstein: Our revenue decreased 7% in the first quarter, and our average closing price in the first quarter was 476,000, a 1% increase when compared to last year.
Bob Schottenstein: Our first quarter gross margin was 25.9 down 120 basis points year over year and up 130 basis points over last year's fourth quarter.
Bob Schottenstein: Our first quarter SGNA expenses were 11.5 of revenue compared to 10.5 a year ago. Our first quarter expenses increased 2% versus a year ago. Our increased costs were primarily due to increased community count and additional headcount. [inaudible]
Bob Schottenstein: Interest Income, net adventurous expense for the quarter was 5.2 million and our interest in curd was 8.8 million.
Bob Schottenstein: During the quarter, we generated 154 million of EBITDA compared to 187 million in last year's first quarter. Our effective tax rate was 24% in the first quarter compared to 23% in last year's first quarter.
Speaker Change: Our earnings predicted share for the quarter decreased to 398 per share from 478 per share last year, and our book value per share is now $112, a $17 per share increased from a year ago. Now, Derek Klutch will address our mortgage company results.
Thanks Bill.
Derek Klutch: Our mortgage and title operations achieved pre-text income of $16.1 million, an increase of 31% from $12.3 million in 2024's first quarter.
Derek Klutch: Revenue increased 17% from last year to a first quarter record $31.5 million.
Derek Klutch: Due to higher margins on loans sold, and a higher average loan amount [inaudible]
Partially offset by a slight decrease in loans originated.
Derek Klutch: The average loan to value on our first mortgages for the quarter was 83%, compared to 82% in 2024's first quarter.
Derek Klutch: We continue to see an increase in the use of government financing, as 57% of the loans closed in the quarter were conventional, and 43% FHA or VA, compared to 68% and 32% respectively for 2024's first quarter.
Derek Klutch: Lones originated decreased to 1,530, which was down 2% from last year, while the volume of Lone sold increased by 26%
Derek Klutch: Our Barron Profile remains solid with an average down payment of 17%, an average credit score of 746, compared to 747 in 2024's first quarter.
Derek Klutch: Finally, our mortgage operation captured 92% of our business in the first quarter, up from 88% last year.
Derek Klutch: Now I'll turn the call back over to Phil. Thanks, Derek. This is the balance sheet. We ended the first quarter with a cash balance of $776 million and no borrowings under our unsecured, revolving credit facility.
Derek Klutch: We continue to have one of the lowest debt levels of the public homebuilders and our well-positioned with our motorities. Our bank-line motorists in late 2026 and our public debt motorists in 2028 and 2030.
Derek Klutch: Our unsold land investment in March 31 is 1.7 billion compared to 1.4 billion a year ago. And in March 31st, we had 866 million of raw land and land under development.
and 803 million affinished unsold lots.
Derek Klutch: During the first quarter we spent 146 million on land purchases and 102 million on land development for a total of 248 million [inaudible]
Derek Klutch: And at March 31, we own 25,000 lots and controlled 51,000 lots.
Derek Klutch: At the end of the quarter, we had 700 completed inventory homes and 2400 total inventory homes [inaudible]
Derek Klutch: and of the total inventory 900 during the northern region and 1500 during the southern region.
Derek Klutch: At March 31, 2024, we had 400 completed in inventory homes in 1900 total inventory homes.
Derek Klutch: We spent 50 million in the first quarter repurchasing our stock and have 200 million remaining under our current board authorization Since 2022, we have repurchased 13% of our outstanding shares
Derek Klutch: This completes our presentation. We'll now open the call for any questions or comments.
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 one on your touchtone phone. You will hear a prompt that your hand has been raised.
Derek Klutch: She wish to decline 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: The first question comes from Alan Ratner at Zelman & Associates. Please go ahead.
Allen Ratner: Hey guys, good morning. Nice job, a nice job and a tricky environment out there. It seems like it's changing by the day, so I'm sure it's not easy.
Allen Ratner: First question, Bob. I'd love to drill in a little bit in terms of what you're seeing, both from a geography standpoint and a price point perspective. Just curious like with all of the moving pieces going on. Have you seen any?
Allen Ratner: Notable ships and buyer demand either, you know, within price points, smart series versus they move up or geography, any kind of relative winners and losers given all of the noise today.
Allen Ratner: Well, great question. As it relates to price point, let me address that one first. Not really much of a change in demand. We have a number of
Allen Ratner: Very high-producing smart series communities throughout the company, which is our...
Allen Ratner: Product line to primarily cater to the first time buyer. It's roughly 54% of our sales. We're smart series sales and that's been about what it has been. But we also have a lot of really strong move up.
Second time, third time, purchased communities.
Allen Ratner: I don't think there's any real conclusion to be drawn on that.
Allen Ratner: If there was, that would be something that we would be all over. We look at that constantly. It's a great question.
Geographically, I think there have been some noticeable differences.
Particularly during the latter part of last year.
The Florida Markets, and I would-
Allen Ratner: and the last number of weeks. Some of that is just more aggressive promotions by us with price, but some of it I think is a return of buyers, a little bit better traffic.
Allen Ratner: You know, Houston and Dallas continue to be good. Dallas is not quite as good as it was, maybe three or four months ago but we remain.
Allen Ratner: Very bullish about both those Texas markets. I think that Austin has been in somewhat of a transition for all the builders there for about the last year and a half or so. And I think, you know, but I long term, I think the Austin market is a tremendous market to be in.
Allen Ratner: Charlotte and Raleigh have held up quite well, comparatively speaking, so Detroit a little bit softer.
The situation within the overall economy [inaudible]
which, as you said, is...
Allen Ratner: Changing daily, if not hourly, has certainly presented its share of challenges.
Allen Ratner: which helped offset what otherwise would have been a little bit of a margin decline, more of a margin decline from a year ago.
Allen Ratner: I think the marginal lift was buoyed by the positive impact of a number of our new community openings.
Allen Ratner: and we're excited about the new communities we're opening this year. You know, it's...
I don't think this guy is falling
Allen Ratner: I don't think it's any time to panic, but it's just a little bit of a hold on time.
Allen Ratner: You know, the spring selling season I think has been just okay.
Allen Ratner: March was better than January and February . I guess we're still in it. You know, April's not as good as March. But, you know, we'll, look, it...
Allen Ratner: It's no time to panic, as I said. We're going to keep doing what we're doing. We think we can have a very solid year.
Allen Ratner: I appreciate the very detailed run down there and definitely encouraging to hear Tampa is showing some signs of life and the new community performance as well, those are all good times. You know, I don't think Tampa's going anywhere anytime soon by that, I mean...
Allen Ratner: It's a city that is still seen on average over the last four years.
Allen Ratner: Very respectable population growth. It's likely to continue. In fact, if you look at population growth throughout most of our markets...
Allen Ratner: Many of them over the last four years have seen 4, 5, 6, 8, 10 percent in population growth, which bodes well for household formations, which bodes really well for our industry. You know, we'll get through this period of time.
but I wouldn't want to be in any other business.
Speaker Change: I appreciate that. Second question on kind of the spec strategy. I mean you and others obviously have pivoted pretty hard towards spec over the last several years.
Speaker Change: I think you said it was about 65% of your sales this quarter. We've heard from some other builders that seem to be dialing back, expect start to bit here over the last few months, given the trappiness and activity and...
Speaker Change: There's this kind of signal trying to maybe bring down that spec share a little bit closer to the longer term averages of curious, you know, A, what are you seeing in terms of the spec margin differential? I know you've actually seen some pretty pretty healthy margins on your spec product.
Speaker Change: But have you also dialed back those starts more recently? Well, first let's put it in perspective this is an area where I think and you know it probably better than me
Speaker Change: But this is an area where there's a distinct difference in strategies across the various public builders with some over the last few years going to 100% spec approach towards the business.
Speaker Change: We increased significantly five years, we were probably 20-30%, maybe 40% spec. Now we're somewhere between 50 and 65% spec. We sort of like the balance.
Speaker Change: In general, specs of soul that lower margins. During some periods it's been a hundred basis points during others, it's been 200 basis points.
Speaker Change: Some markets may be a little higher than that, but we've been able to keep the gap between the two pretty close, not out of stubbornness that's just where the buyers seem to be. But there is a slightly lower margin on specs in most of our markets.
Allen Ratner: You know, also Alan, it's just kind of a subdivision by subdivision issue. Product matters quite a bit. You know, today we're doing 15-20% attached townhouses.
Allen Ratner: And attached townhouses, you know, tends to happen when you sell it, you know, a unit or two in the building, you start another building, etc. Also, our smart series are more affordable product line. In general, we have a few more specs.
Allen Ratner: If you look right now with us having about three finished specs for community.
We feel very good with that.
Also, with the right by-bam [inaudible]
Allen Ratner: You know, it's pretty costly when you start getting outside of 45 to 60 day window to be by down those rates. So again, we manage that on a subdivision by subdivision basis for sure.
Perfect. Thanks a lot for all the detail. Good luck.
Thanks, Alan. Thanks, Alan.
Speaker Change: Thank you, ladies and gentlemen. As I remind her, if you have any questions, please press star one.
Speaker Change: The next question comes from Kenneth Zener at Seaport. Please go ahead.
Good morning, everybody. Thank you. Good morning.
I am interested on how you're thinking about
You know, you're-
Speaker Change: Order Paste, which, you know, it's a fall seasonality, it's just paste kind of, you know, maybe down a little bit if you look at the three in long term averages, but not more importantly, how are you thinking about your, you know, units under construction. Thank you.
and how starts are going to be related to pace.
Speaker Change: As you kind of map out, you know, where expectations might be for, you know, your unit's under construction by the end of the year. I'm just, you know, if you're building spec, you might want to build more spec, right? Even if orders aren't there, because it'll drive the closings. But can you talk a little bit about how you're thinking about that?
Speaker Change: If you look at us today, we do have a few more communities than a year ago and as we talked about we planned this show having on average about 5% more.
Speaker Change: We talked about in my remarks that houses in the field today are like 4,800 verses 4,500 so
Speaker Change: We are continuing to be careful with what we put in the field.
Bob Schottenstein: However, you know, with Bob said, you know, we're trying to manage very carefully on a subdivision basis.
Bob Schottenstein: It takes a long time to get aid locations under control, developed and opened. So we're trying to, you know, balance that, you know, good margin, good return versus pace.
Oh.
Bob Schottenstein: You know, we would like to do, you know, a little more volume than we're doing. You know, last year we did, you know, over 9,000 houses.
Bob Schottenstein: Our volume in the first quarter was down a little bit but again we're being mindful not to get too far ahead of things in the market but again where we are now with having a few more communities and a few more houses in the field we feel like we're in pretty good shape.
Right.
Speaker Change: I wonder, you know, buy downs which had been done in the 60s and 70s by builders went away and I've always been kind of curious as to why that happened. It's um
Bob Schottenstein: You know, you hear some builders talking more about price reduction versus mortgage buy-downs? Can you comment on?
Speaker Change: How those by-downs might directionally break apart or be different within your conventional.
Speaker Change: Loan Structures, you know, where there's more down payment, verse the FHA VHA, which is a lower down payment, or you're seeing more of that FFKC in the lower down payment.
Speaker Change: I guess the first thing I would say is that, again, we manage that not only on a community basis, but a customer basis.
Speaker Change: Customers more in the entry level price point. A number of those customers may need more help in closing cost.
Speaker Change: being stressed a little bit for out-of-pocket, those type of things. Again, buyers are different. I don't know, Derek, Bob, do you want to... Well, a couple things on it. First of all, mortgage rate buy downs.
Today.
Speaker Change: I can't come up with a better or more effective tool.
Speaker Change: given the rate environment and all the other issues and all the noise that we've been all talking about.
Speaker Change: I can't think of a better way to drive traffic and hopefully promote sales.
Pure Price Reductions
Speaker Change: have a massive impact on backlog where people bought at a certain price. If you lower the price today, you're going to be retraining the entire backlog or at least big portions of it.
Speaker Change: So, the great thing that the mortgage rate buy downs do is they protect the integrity of your sales backlog. That's number one. Number two, in terms of what we're offering
Our government rate is the by-down rate is lower.
Speaker Change: than the conventional rate. Today, on our FHA and government packages, we're generally on a 30-year fixed rate basis around 4 and 7-8, whereas with conventional, we're right around 5 and 7-8.
Speaker Change: But, you know, that's something that no one knows for sure as rates do drop the cost of the buy-downs drops as well. But, right now, um...
Speaker Change: Let's call it for what it is, Kenneth. It's propping up the home building industry. If you took away Ray Downs from every major builder in the country,
Speaker Change: I'm not sure where we'd be but we wouldn't be where we are and it's also a tremendous competitive advantage for the larger builders like us.
Speaker Change: who own their own mortgage company and are able to nimbly almost on a daily basis react to what's happening and we've tried to do that as best as we can I mean primarily we're in the payment business
and what's...
Speaker Change: Most important to the majority of people is what's that monthly payment.
Speaker Change: And again, there's a different result based on a price reduction, which also can impact the price of values of homes and those types of things from the spot I've talked about. But again, the rate by down, you know, it depends, you know, what the customer really needs. We try to be as efficient as possible. Our mortgage company helps us a lot deal with individual customers. Customers need different things.
Speaker Change: and we try to make that available to now at the most efficient cost we can.
Thank you for your thoughtful answer.
Appreciate it. Thank you.
Speaker Change: Thank you, and the next question comes from Buck Horne at Raymond James. Please go ahead.
Speaker Change: Hey, thanks for your time and the opportunity. Congrats on the results on a difficult environment.
Yeah, you're very welcome.
Speaker Change: So, thinking through the kind of impacts potentially is the quarters progressed for the remainder of the year and how you're thinking through, you know, things like lot cost inflation is it's going to roll through the income statement. And also, you know, you're sticking brick costs, you know, factoring in the potential care of impacts. I'm wondering if you guys have thought through that in terms of the supply chain. Thank you.
Speaker Change: I'll give a little initial answer, and then I think Phil has a lot more detail than perhaps I do on that.
just on sticks and bricks.
Speaker Change: Right now, there's really been no impact. Art costs are essentially what they were a year ago and some instances are slightly lower, which has probably helped some of the sequential movement on the margins.
Speaker Change: And, you know, despite all the noise which crescendos and then decrescendos, like I can use the music terms on tariffs, we haven't seen any impact yet. Will there be impact?
Speaker Change: on Consumer Confidence in some indirect way. My guess is, if we do see an effect, it won't show until somewhere late in the year when, if those costs do go up by virtue of tariffs, they're reflected in our fourth quarter closings.
Speaker Change: Beyond that, Phillip, you want to add anything? Now, we think our, you know, our national account people and our purchasing teams have done a really good job. We've been working on a number of programs the last couple of quarters.
Speaker Change: and his Bob said our sticks and bricks the first quarter were actually a little less.
So, we're pleased with that
Speaker Change: We're obviously trying to make sure that we're not single sourced anywhere. We have seen a little more availability of substance suppliers, but really that's about it. We're just trying to see on top of everything as we can, you know, try to focus on affordability best we can with targeted product. [inaudible]
That's an area that
Speaker Change: There's no component as you know that impacts the unprice more than land and land development.
Speaker Change: I don't I don't think anyone should count on much movement on land prices in any of the markets in which we do business.
Speaker Change: We haven't really seen much movement on the price side, maybe better terms by that I mean...
Speaker Change: Maybe able to push off closing or buy more time, buy more time given the fact that in some markets it's taking longer to get things zoned. It's taking longer to get approvals.
Speaker Change: A seller understands that. They know we're not going to close on unzoned ground. That's just not what we do and most of our competitors don't either. So other than the term side
They're really hasn't-
Speaker Change: We haven't seen much, nor do I think we will see much on the price side.
Speaker Change: I don't think there's the old line. They're not making any more of it. The land is what it is.
Speaker Change: and the strong locations I think are going to continue to command, you know, top dollar prices, and if you want to play the game you're going to have to do that. And that's, and we're prepared to.
Our balance sheet has never been stronger.
Speaker Change: We've got a great land position. We own less than a three-year supply. We've always been very disciplined on that. Our strategy with respect to owned and controlled really hasn't changed. We're not big on using land bankers. We don't feel like we need to and we don't want to pay. We don't want to pay.
Speaker Change: I use the T-word. We don't want to pay a tariff to land bankers when we don't have to. And we feel really good about our land strategy but that part of the component of the end price, I don't see much change on that anytime in the foreseeable future.
Very helpful, I appreciate all those, all those details dot
Um...
Speaker Change: It's something we always look at. We talk about it every quarter with our board. We've tried to maintain consistency. You know, we're not trying to game the time in which we purchase. We think a consistent approach.
Speaker Change: is the most sound one and in all likelihood what we have been doing will continue to do. Phil, I don't know if you're hearing that. Yeah, yeah, Buck, I mean like Bob said, we've had a consistent.
Phillip Creek: Strategy the last few quarters by a $50 million box. And, you know, we think now is a good time to have lower leverage and bank line availability and those type of things. You know, we're interesting curve, one of the lowest in the business.
Phillip Creek: We like that position. Something we'll continue to look at, but again we're just trying to be very mindful to make sure we're positioned very good. We've always run a conservative company and that's kind of kept us where we are and so forth. But something we'll continue to look at but we feel really good about where we are.
Speaker Change: All right, very good. Thanks for the thoughts, guys. Appreciate it.
Thanks. Thanks.
Speaker Change: Thank you. The next question comes from Jay McCanless at Wetbushed. Please go ahead.
Jay McAnlis: Hey, good morning guys. First question I had, where do you think the gross margin backlog is right now relative to what you saw in the first quarter and maybe directly how that's been turning so far in the second quarter.
Jay McAnlis: You know, Jay, it's a pretty flat number, but again, as I said about 35% of our closings during the quarter came from spec sales that sold and closed in the quarter.
Speaker Change: So Bob talked about the continued pressure on margins. We're doing all we can to keep those barges as high as we can. But we were pleased with the 25-9-1st quarter, but we think they'll be continued.
Archen Pressures as we go through the year.
Speaker Change: And then, you know, the exit velocity from January to March, it looks like orders continue to, the order top continue to get better. For all of 2Q, you guys have an easier top to last year. I guess, you know, what are you seeing right now on the field, whether it's from resale competition or other headwinds that could make the rest of the quarter maybe trying a little bit lower than what you saw in March.
Boy, you know...
Speaker Change: If I knew what sales were going to be like next week, I would tell you.
Speaker Change: There's been so much, we're all sick of the word uncertainty, but there has been so much uncertainty.
Speaker Change: and so much volatility just within, you know, the economy in general, but that's translated itself to demand as well, week to week. You know, some weeks we see a big uptick in traffic and the next week it comes down.
Speaker Change: There's been very little consistency. It's been highly unpredictable. I actually thought our margins would be lower than they are. They've held up better than expected. It's not because
Speaker Change: What's the term that I heard use the other day? We're not trying to be margin proud, I like that line. We think we're balancing our margins with what it takes to get our sales to where they need to be. [inaudible]
Speaker Change: We know nothing good happens unless you sell something and we're pushing to sell as much as we can, but right now, you know, I think the second quarters, you know,
Speaker Change: If I had to guess, I think it's going to be up and down uneven and mostly on the challenging side, but I don't know, I'm hoping that we'll be pleasantly surprised. The sky is not falling, and I said that earlier, and I think the...
Speaker Change: You know, recession or great recession, which I think is I just don't subscribe to that at all and you know
Speaker Change: Bringing 15% to the bottom line and a near 20% return on equity. The first quarter was one of the best first quarters in company history. It wasn't as good as a year ago. I get that.
Speaker Change: You know, we're poised to have a very strong year and at least a very solid year compared to last year, likely down, unless something significant were to change, but that's no surprise.
Jay McAnlis: If you do, you're going to end up, you know, we've never led the league in guidance anyway as we're often reminded and we're certainly not going to start now. So, that's a hard one, Jay. I respect the question completely. I don't mean to be.
Speaker Change: You know, less than honest about it. I just don't know.
Speaker Change: You know, Jay, I mean, you're right. I mean, if you look at the second quarter of last year, you know, our sales were actually up 3%. But, I mean, we were surprised January and February sales were weaker than we thought March was better. [inaudible]
Speaker Change: And we're not sure exactly why. Again, it's just something we watch every week, community-by-community. We did open, you know, 27 stores the first quarter.
Speaker Change: Okay. And then Phil, could you give me the total spec numbers at the end of the quarter and where they were last year I didn't catch those numbers?
Speaker Change: The spec numbers? Yeah, if you look at the end of the quarter, we had 700 completed specs a year ago, we had 400 and as far as total specs, now we have 2400.
And a year ago, we had 1900.
Speaker Change: We feel really good where we are, you know, basically having about three completed specs for a community.
Speaker Change: Our community counts up, too. Our community counts up and then we've talked about it being up on average, about 5%, when it shouldn't move up as the year goes on. So we feel good about where we are.
Speaker Change: You know, managing that very carefully, there is most of the time a little bit of margin leak between specs and to be built, but again, we try to be very careful, you know, how we price and sell those specs also.
Speaker Change: That's a good question. That's just a really difficult question. You know, we've been pleased.
Speaker Change: with the ASP and the margin and the pace of the new communities. We've opened the last couple of quarters.
Speaker Change: You know, in general they're performing a little better than we thought [inaudible]
Speaker Change: And we feel really good, especially about our new communities. That's just a really tough question, but...
Speaker Change: You know, when you look at our margins at 25.9, you know, again, we're pretty pleased with that.
I know some builders to report that information.
Speaker Change: Where that gets very confusing is when you open up new phases in an existing community and you always intended the new phase to be at a slightly higher price because the lot cost is slightly higher.
Speaker Change: I'd say where there's true pricing powers, probably less than 10% of our community.
Thank you.
Understood. Okay. Thanks, guys. Appreciate it.
Thank you. Thanks, Jay.
Speaker Change: Thank you. We have no further questions. I will turn the call back over to Mr. Phil Creek for closing comments.
Phillip Creek: Thank you for joining us. Look forward to talking to you next quarter.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we are so that you please disconnect your lines.