LSEA - Earnings call transcript Q3 2021 | Landsea Homes Corporation

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Operator

Good day. Thank you for standing by, and welcome to the Landsea Homes' Third Quarter 2021 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Drew Mackintosh. begin. may you Sir,

Drew Mackintosh

Homes' Earnings Landsea Third to Call. Quarter Welcome

relied Homes would note to statements statements subject risks We place of Commission. any undue that do laws. obligation over the to update new laws. with the call call to not result a to as I or begins, invest as Landsea in not Landsea securities subsequent may not these but and federal forward-looking Homes our under should its events Before numerous on to uncertainties this whether assumptions, statements should the statements like will undertake of the that be forward-looking risks, or filings are Accordingly, except factors any circumstances of you not made, upon cautions were uncertainties, date views which forward-looking otherwise, reflect required meaning reliance are forward-looking within and deciding representing securities. securities risk statements they by as information, date change limited Securities described events, Exchange and the future forward-looking our time. These as whether include to and the after be applicable in in include

the its Chief reconciliations Executive John. and and like Accounting Officer; Chief GAAP SEC to measures over Forsum, Landsea's filings. measures today Schreiner, Additionally, turn of the John Landsea discussed Mike that, comparable Ho, website financial Hosting Officer. call the I'd Chief can through Trent most to non-GAAP on this to Homes' be are Officer; accessed With Operating call call

John Ho

acquisition number progressing access results more in have over outlook. remained XXXX quarter our aggressive land an of on type we for enhance billion quarter mode and and builder the made a us Good market year, $X of expanding company's existing been today morning, joining has third growth. fronts you in and generate third lay the as total approximately to several revenues for as of Homes Estate the a on track our XXXX for we to on update progress in provide operations to go the foundation Landsea new rapid with we thank capital, nicely, our presence acquisitions. their into production company's Vintage our continue greatly their and transitioning while been The for

We Landsea's for us technology the ending quarter continue backlog differentiated quarter, and which and record remainder about strong in our company's to the demand These from for the along price. optimism new give home affordable features of product, the latest positives the performance see at XXXX. with outlook year

lot we These terms during there's a times to excited efforts industry. cycle future, that continues sales level construction of are our of today's be quarter impacting extended challenged that comfortable issues our the operating beyond many be entire in in by particularly about supply with, to the are compelling in environment issues Arizona. us chain While company's communities, a our cut to our

that felt has or as the ones. be we backlog new homes not a already of always homebuilder best will right been the do customer, out of stretching Our by main to and customers existing interest an our focus robust in

segments a facing manageable rate during upfront the and about more cancellation quarter our our Despite been approach XX.X%. transparent backlog driven industry see company, affordable long-term issues believe these to are we have for and continue great with this We markets, market. keep and fundamentals, our the opportunities focus customers in our growth we by on we challenges, favorable helped of our the trends and operational strong at

of Texas, in by and end lot XXXX. XX% ending as to markets in count presence We Arizona, are compared California, Florida, rapidly the quarter and increased high-growth our expanding our

our operations scaling We growth record have continue. established acquisitions a can believe quickly a combination trend of and this organic through of and track successful

$XXX call got Our permits to of increases a with third in capital the credit Western provide like to borrowing in for This to of compete up with project to Mike? cumbersome $XXX establishment lending that deliver million other the now I'd additional the our of partners, replaces new from to Bank, and put an quarter effectively capital detail aspirations quickly at facility capital. rest will have turn disadvantage a opportunities and an Mike, the facility boost that when our on syndicate, on deals at and the over who financing land operations. feature they sources with on growth act accordion lower to Bank new builders. more we competitive commitment a America, the With the million. more that, Alliance capacity ability a more unsecured arise revolving Thanks available us other cost of homebuilding

Michael Forsum

the Thanks, at continue We home John, buyers innovative our which third in lifestyle, the price. affordable in and quarter our latest an solid homes, gravitate to morning good as new to sustainability, healthy performance at and feature demand to high-performance communities saw technology, trends everyone.

by Our healthy economies, inventory, favorable a local levels markets to continue and exhibit motivated pool buyers. industry low fundamentals characterized of of

personal are homebuyers. to addition spaces packages to convenient and space demands high-performance to lifestyle a These the ready for enhance upon and program, for automate to features optioned today's focused stock fitness LiveFlex of lifestyle our on rooms, home our needs. or homeowners In their technology-forward LiveFlex move-in meet offices, Landsea's home educational

a sales challenge supply John quarter, to efforts the a chain we slow result. our and industry continue mentioned, As of had to the be during as issues for cadence our

manner, were level issues market of largest our homes process lack for throughout Landsea construction our the ongoing Compounding While of in not building our materials that time. especially labor is a This to to our deliver in been is while timely that in homebuyers the market. in situation the which and we but working were expect shortage Arizona, a delays diligently some the bottlenecks quality Homes. these acute is alleviate Landsea, they unique that in operations in are not markets, a sacrificing the was has all our homes of operational of present

on have this made $X.XX as our to a to annual billion are increasing revenue result, We we target progress And billion. approximately already $X.XX front.

already as lifted we in Additionally, seen October new limitations sales an have we opened on more and in orders improvement our communities.

Our an orders in month X.X, the of was absorption of an of XXX increase pace month-over-month. October orders at representing XX%

In pace ability combination California, innovation home our Our quarter of the demonstrated and California per to unique sales X.X competition at Southern the operations best month. Landsea Northern with per Homes community new an posted has the homes outsell both and affordability. during

Ellis averaged during month master Tracy which the in raise competition comparable area. X.X sales continue also above at communities outsold in the prices. California, communities ShadeTree plan the was new Southern to plan our and X the per quarter neighborhoods we the In during quarter, even the Our well Ontario master as in

and established Southern in to XXX California in sizable a over We presence homes for have XXXX. market expect the deliver of all

for industry our we over of We each markets the marketing focuses nicely. year. In aggressively investment current affordability continue we We platform Austin, quick feel will lots much acquisition rapid Estates' by to market of the inventory to that complement will our a The market. as this record the from brand, a Landsea pursuing product which secured gives we the fundamentals and land new solid quarter, Texas, through and to company's business and high-end In in successively going the to expect the established to platform scaling of deals in markets and Homes turns. be our progress and serve believe new operation in we true end and grow in made efforts we an converted acquisition. our of states. merchandising of Landsea engine transitioning are operations via deals excellent will a and one us Florida, have great Texas into acquisition X during same Florida growth XXX as during at which securing land our made fashion, Vintage our local with all quarter. track Estates, in the entered to be the existing been underwriting the our market of in Vintage that or a quarter, these we systems presence a performed semi-custom during sizable assumptions fully see their has forward, integrated Homes entering great we in profile on above the for communities the which

turn results for like Now detail Schreiner, and over to give quarter our our update Officer, you the I'd Trent? on who the Accounting an our provide Chief will Trent guidance. on call more to

Trenton Schreiner

sales a revenue other in million we Within quarter $XXX for sales revenue sales quarter lot chain communities market Total deliveries $XXX homes. affecting from number was pricing $XXX was price the the Total in our other quarter XXXX. favorable prices third to The homes to Mike. during and the selling $XXX,XXX third XXX revenue Arizona decline revenue compared homes of to Thanks, experienced $XXX,XXX decreased compared large quarter of revenue, an issues period. the the the to in in a from average of in higher-end million $X no year supply of XXXX due million largely industry. generated million sales million the to ongoing of quarter compared the XXX XX% the lot of $XXX and increase at power to XXXX. an year-over-year average decreased delivered of was at deliveries total to sales result with price the homes delivered third The average and third prior in compared of Home in XXXX.

million pace year a generated a This basis, Homes prior points average to increased our price by offset particularly XX.X% sales average in XX, the active at of quarter. and XXX million in $X.X year $XXX,XXX to of with $XX.X the homes we GAAP a orders Landsea margin community result million to net XX, million $XXX gross increased monthly orders XXXX. net quarter, decision X.X the with benefits on higher was expanded to an is a attributable The slow company's to homes to sales The in to improving This compared September monthly temporarily to of value the the the active third primarily backlog prior income dollar of XX% to quarter. the Homes X,XXX September adjusted dollar million XXXX. income of $X.X to across with period. Adjusted $XXX year-over-year community. in and at quarter income to basis per compared XXX third $XX.X sales to the $XX.X per On a the and margins Net EBITDA X.X production homes period. points adjust new attributable rate $X.X California costs. cycle value prior to basis an XXX margin of increased due and million prior sales home Adjusted largely lengthening XXX Landsea year compared dollar XX.X% home of to year period. value increased was homes million of sales gross sales in in absorption Total in million a compares $XXX year prior an absorption in adjusted for X.X times. to compared to markets segment, price value million our profitability XX.X% our to appreciation gross third within with price period. of the During XXX $XXX,XXX compares rate year-over-year million dollar $XXX at or of of a decline

We sheet. and Turning $XXX third million balance $XXX of debt cash in to million. the with and of the total cash total equity million, equivalents, ended $XX quarter

and Our net book debt third capitalization ratio end at to compared the our was XX.X% to compared XX.X% the at of December of at December ratio XXXX. XX, to XX.X% was XXXX, XX, quarter debt-to-capital XX.X%

feature mentioned to As increases revolving company credit capacity an additional to borrowing $XXX accordion with that an $XXX million. up million a John established the unsecured facility permits earlier,

on October of we new As available $XXX facility closing, liquidity approximately and unsecured had cash $XXX closing after of X, in the credit new Including of borrowings approximately had credit under had total the capacity million. borrowing of we we million hand revolving date our the facility, outstanding on $XXX million.

under closing the had the total $XXX on had approximately Including $XXX borrowing facility of As of and we approximately our credit closing, $XXX capacity on after new cash October hand X, borrowing facility, outstanding million. we million. unsecured liquidity the million had of at credit new revolving we in available

our like I'd guidance. summarize Now to updated forward-looking

we XXXX, total XX.X. now is $X.XX million margin X,XXX between year of home to be For expected revenues to to XX.X% the expected billion to price prior, sales full with and home sales average GAAP to to $X.XX report to margin $XXX,XXX an to XX.X% sales $XXX now $XXX,XXX. expected billion, X,XXX delivered at expect billion be total $X.XX gross gross be XX.X% adjusted is to homes to

expected $XX $XX Finally, adjusted million in net is $XX Homes million, XXXX. attributable be prior between million income $XX to to Landsea to million to

the Now I'll call remarks. over closing to back John turn for some

John Ho

pleased I Thanks, am quarter. this conclusion, with the Trent. we In progress made

the to ongoing propelled for believe for chain not home our While company. should Landsea our homebuilding, for market while the present offerings near-term demand high-performance housing the long-term a market product do allow drivers our alter outlook will affordable the of beginning the We share. supply issues cycle future focus headwind have and industry or since continue this the gain foreseeable they

capital our result, will excited And help this future the for open what us and should of our operations. made the strong like thanks path. now fastest-growing questions. I'd in coupled We That call the remarks, the Operator? the proven The as are expanding continue our our Landsea. homebuilders holds our this to progress we prepared and this credit quarter, to for facility, model on trend with been believe new several have about a country position concludes to over last and years continue, we one

Operator

Instructions]. [Operator

of Alex Riley. Your first question line comes from from the Rygiel B.

Alexander Rygiel

Couple quick the How in should up quarter, times It the commentary your great cadence stretching your about picked right? of sounds about given lead sales questions think October. cadence we the through that closings to of fourth has here.

Michael Forsum

then we the that during which getting really windows. the out started the with the It front the cycle installations production the high But of with that over of has material slabs Forsum. I Mike and days, XXXX. lumber, and last times a the challenges a us through level it's are challenge challenges we're and the the large faced us. HVAC behind moved confidence has through to last XX bulk month bulk major given that Alex, we've us, in concrete believe seen larger area and large in in installation of been and of pickup into

a the We have or temporary get temporary from that be whether been that appliance comes forward installing be in, and it install for able for to period may we appliances going to home closings, find of garage until here actual ways doors can our it. time

house get the through lot a going us more believe move forward. So closings optionality we to we have the to and final

Alexander Rygiel

you That's us FORENA also good on sales status to an of hear. in And update then could York? give New the

Michael Forsum

Sure. I'll it over turn to John.

John Ho

Yes. York Mike Alex, were we I and -- picked and now. FORENA really out We're York. has week, sales last actually New in about sold pace back the at New up XX% in nearly

further this much we than year. ahead of at time So anticipated the

pricing there. our sales pace good pricing, is absorption pre-COVID. other and at And So that

Alexander Rygiel

see pace And look as for out, the should that to deliveries like it sold relates FORENA? what XX% does When start we to occur? of those

Michael Forsum

actual now been the building coming towards We're lobby working The scaffolding. and down In late pulling on completed. Those the will occupancy. themselves interior now begin units mid- the -- getting completion. January. to right has We're on temporary all our in are

to on moving the So the making is over those people very being that closings floors close we so can building in. turned and start

Alexander Rygiel

excellent. last That's Then question. the

high. relates going As guidance, very, Is very the I'm the your It difficulty are when function bit to for a the it a suggest of little to I revenue FORENA? having ASPs seems guidance be look of fourth to quarter. at that

John Ho

million. function our about actually Northern communities It's this at price at called Relevae. Alex, I Those of think, California is in point, higher a a John. of are one $X

what's that's pulling that So up.

Operator

[Operator Instructions].

comes Barclays. from line from the of question next Your Bouley Matthew

Ashley Kim

today. This on Matt Kim is Ashley for

to And of pace the trends. about talk on with you a how from detail that next starts year? closings So orders you sales kind Can positions grow the level of how that compares to the in supply commentary, that that saw then thanks standpoint all month? your October for you the coupled

Michael Forsum

Sure.

month the up great September we're going standpoint we this and sales that seeing I'll are, absorption Ashley, out November we at our at into towards in after. got sales of a communities. more call we're for October for stab we would our Forsum. is believe moving From back better. Mike clean first. it have can rates John we normalization which communities of a of sort take of I what trends where even we the released sale was hope And then homes really strong when opened. seeing it

communities. We those to continue to some XXXX. to able leveling price increases, off back pricing seen extent going on happen get continue our to we power before, into but moderate degree, not at the but costs, costs what's seen we've be to to that some really we've And in relate have some

what So we we in our sales a for because strategic a what in strategic to -- baked most the pause part, able I called in it it deliver generally being we was anticipated summer, did the efforts around had, XXXX.

just to ahead far were our we selling So way too catch with that really into demand. up of XXXX, really ability

we that it process to sales we concentrating homebuyers escrow managing future them. day, we're some make we We that have willing with. to built concentrate is wanted plan were in comfortable our in dates. signal getting that summer. that those slowing our the were feedback push end the what to are through but sales into so was or the to in we front of Also, our the and getting we really that, we we we at hand on wanted customer moderate for focusing we degree, XXXX to around priority us, in had we having on what And business that on production that and sales could XXXX, a were sure the So us had business was to that thoughtful existing customers were that were make some at hit and to today yet, and and our of some closing #X we for were houses delaying hand thought the homebuyers we of do these releases, that

John Ho

John. And this is

Just that. to on add

it fourth and communities we'll quarter. opening as And in relates fourth quarter, more starts this be as communities, well this result, As that actually to opening more we'll strikes have new with we X this in have quarter his of correspondently. up in orders a fourth these

Ashley Kim

affordability then has on about And from indicators focus -- in just you all? at appreciating it. any talk list stretched the entry-level. buyers that Got the Can ASPs

Michael Forsum

markets, of starting particularly In isn't getting our or that out ceilings, fact Phoenix, the some to the affordability of believe, but qualified not there we desire hit put we're some down of to in ability outskirts having there, up payment necessary. the the

or of So to some buyer seeing we little trying also going quickly, fairly to all were they they bit had are if but much a home word, see discretion of the making We're find think the they're a during bit pretty probably indiscriminate. from terms of lot the in off that -- in year those starting up well, want. that the snapped like I to and areas. I'm leveling was And spring, a more sure hours. the get within Last we a that release, very

going Now that's to too. house, that end back buyers what they that wait definitely we're and we color seeing, our some another points, that's are elevation the we're the the to want. for And step willing the of price our finding in lot, the of them these get as at release to approach communities,

Operator

for questions a have this conference Speakers, there wonderful are concludes at participating, you day. This call. time. Thank and further no today's

may disconnect. all You

Landsea Homes (LSEA) 13 Nov 212021 Q3 Earnings call transcript