LSEA - Earnings call transcript Q1 2022 | Landsea Homes Corporation

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Operator

Greetings and welcome to the Landsea Homes First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Drew Mackintosh.

Drew Mackintosh

to first welcome earnings and afternoon Landsea quarter Homes call. Good

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

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

John Ho

share first reported results over our and the quarter quarter acquired $X quarter the for update as $X.XX we job a XXXX warrant or the on net delivering $X.XX the remeasurement or points gross sales be provide the an of diluted our continues in what the revenue homes share. did our Homes us share Good in on net for basis significant On of increases today quarter liability, closed price afternoon price, in million homes the joining first for diluted impact income income with you of associated sales of of XXXX. $XX.X adjusted and loss of of losses million excludes as for earnings per million and $XX at basis Landsea over implemented the purchase challenging was outlook to teams first an inventory expanded of increase a the per quarter on we on which company. an go operating industry XX $X.XX year-over-year grew thank net our accounting deliveries, year-over-year per XXXX, reported Home cost diluted the XXX basis, in improvement in a we GAAP XX.X% and inflation. or environment. outstanding Home to an ahead margin stayed for XX%

remainder supply million, that of Landsea industry, a testament homes also strength scale the the to construction deliver further us These the successfully goals a our great are the it's X,XXX We quarter on position in the healthy X.X home new This to putting dollar with with value $XXX proof of Homes chain pace experienced across evidenced by in for of homes backlog that year. have results sales month. can ended ongoing We per by sales per the platform quarter plague industry. our the to manner. profitable the in were for of we as homebuilding first not a been in issues continue could higher operation ordered our trends constrained community quarter, our pace

buyers maintain homes manner, a lid on and which a in among difficult natural new supply, made create have they While have a these helped for to urgency new home headwinds home pricing. kept it close also has timely a sense forum of operational

a efforts XX,XXX markets end country at We the make scale operations in markets stood in over Total some home best and important areas strong the rapid These to given should positive benefit for expense Phoenix, lots It's at increase growth markets lot of our the Landsea the high of our lots, population are of lower has thanks count in profitability. the ongoing our Austin, these our in cost a during quarter appreciation, markets price in to and the We of which years place, representing to come for Orlando, of to are located the drivers recent to the like that continue progress economies demand these building have migration first the XXXX. experiencing not which come, XX% growth sizable quarters. long quarter in believe home to note investments rapid country. first quarter. local given runway and growth in at

organic be as We M&A, purchase strong despite disciplined been and headwinds our have posted acquisition have result, accounting or efforts, the associated land with extremely a price whether margins through it adjustments. with

Landsea we enhancing most In banking agreements tying At us as manner current more turn results flexibility, share agreement detailed great operations. when in over a while addition, our I'd lots have we de-risk made With controlling to to We lot believe arrangements confidence additional our via and coming in via our given ability this portfolio over strategy anticipate strong up Mike, efficient quarter. scaling lot market. our profile available. the who count provide and XX% and a will the market confidence, further controlled, the in a in quarter were the owned. the helps that, great stock believe stock to gives today's of we and Both quarter our in our end that lots return like To were began show XX% operational of we've execute financial first management of our option capital this increased quarter lots the the substantial possible, our repurchases time. see with quarters, value of land ended and Board the in we purchasing thanks continued our homebuilding the momentum, first outlook. fundamentals number represents our our operational with progress to call and Mike? option and the

Michael Forsum

XXXX a backlog resulted value. prices and off guidance profitability Thanks to good and of favorable home for great record well-located home we to new supply a strong fundamentals, stated saw a company closings and Landsea afternoon new units is achieved combination everyone. orders of existing sales of for our created quarter, start both John Homes first and in divisions a limited inventory and environment. demand as that in average as market solid trends terms in generated We the a sales our positive each great of in and exceeded communities,

Our areas of focus be sales of the demand. by the segments affordable more which our were bolstered one on of healthiest the efforts continues to can market,

stays capabilities. as of better mentioned, remains first has XXX% April, we home community. innovation sales of generated fairly started got at even consistent We to driven a from on and efforts into number increase activity believe over performance home as somewhat XXXX, also efforts home active on platform, an latest throughout of sales per instrumental that remained in sustainability, the amenities. and our a our attainable the rates in orders meet generated Our activity X.X XX% this price XXX largely success. energy appeals quarter the representing been a Sales rise. strong This community boost quarter, the healthy by Order constrained, a to high focus align quarter, first John We increase orders savings, continue which we features XXX to sales to new pace production lifestyle as figure sales demographic as our our new count. in our automation, a a segments

While for our more headwind we are qualified markets available no buyers supply. there rates higher our still doubt industry, see when is in a

watchful backlog home average a affiliate rise our the and everything eye Buyers financed on and through who their we minimize mortgage We purchases strong to to of loan value our rate in in of are single-digits their believe fallout an income a to level of debt credit will low average recent annual backlog effect. income the profile stress an doing with have and light the in backlog are rates can in mortgage range. XX% tested be FICO average the a XXX score and will remain of $XXX,XXX. We average the up mortgage X% XX% an keeping and household to

proactively out locks ones We get have particularly and extended been and reaching rate place. to encouraging to existing close backlog, our buyers in to lead-times them with

of very their commitment purchase seen have to fall result of home. we far, buyers their backlog noticed real rates and as of complete the have behalf out rising few on So a

update an more Now, and financial to to I'd Chris? Chris over guidance. results this forward-looking detail who like give to our quarter provide the turn will our on call

Chris Porter

exceptional second quarter the Thanks our everyone. provide full the quarter first I and for Mike outlook highlights will and our afternoon, for good the cover company of year. and

We portfolio the are have share income delivered we first of desirable $X.XX we of results loss quarter success. KPIs. expanding had the reflects delivered remarkable in $X.XX per $X.XX the period compared share, a up pleased last adjusted quarter to basis, same share On to in from a the per an year. net $X.XX per our the to year, key housing and great last most across of last have of markets team's all some result year. focused We the on Throughout our the

sales our continues sales, an XX.X%. the New communities increased for growth XXX in $XXX to for home increased increase a price accounting XXX first been have to increase of to XXX% at of an and XX% we revenue year. And average XX% to more compared mix. building of enjoyed York of during to our offset delivered the pricing home Florida, the XX% dollar and a a ASP purchase absorption same sold total of In gross XX%, adjusted price homes selling The X.X last excluding $XXX,XXX ability $XXX than XXXX. we As interest and quarter the our period experiencing. an selling our a represent basis, of These and community margin team rate during of a Mike improvement and to cost effects expanded XXX average cost orders, margin gross monthly have of the quarter, basis mentioned, XX.X our growth that on price to we total, over Texas, selling On pressures the at reflecting home in team points the sales average quarter per million the homes $XXX,XXX a in community. home X% value, added million

the Additionally, as and remain the we our quality highly their in rising rates, for potential monitor qualify confident and the possible test of close. we stress backlog interest continue ability to effects purchasers issues of and to

total of XX% and high at maintain portfolio believe fall quarter, that than the on we we mentioned, cancellation can X% anticipate potentially During mortgage to current single-digit and the we a able be based demand, rate the out replace XX% as in last rate, our less purchasers. Mike compared X,XXX We backlog we'll and This a $XXX.X average ended an those represents in at with the to dollar million of value sales total homes an price quarter volume of $XXX,XXX. dollars year. in growth XX% with

cash, close hand and borrowings under the Arizona, million in we to January held and cash Family Florida. credit ended and real quarter turning we cash inventory in Now, billion used $XX.X balanced and equivalents, and quarter balance the a facility Builders more with the amount And $X.X of small as in we estate purchase our California, escrow. to evenly in projected on sheet, Hanover with between cash

$XXX.X for million. We ended debt had a quarter liquidity unsecured $XX.X availability $XXX.X in $XXX.X million with million. of We million net first of under also debt, total the facility in credit a total our

the million our debt net debt announced buyback quarter we program. the ratio approved pace was to throughout their rest was stock capitalization of XXth, Board On the XX% X.X shares book right program, targeted Our confidence at our end the in $X.XX. million levels. also ratio April to and previously pleased of capital first shares line of on our in $XX of our has with our price an this XX.X%, million performance completed We're to purchase of the additional of the of at of an authorization in net $XX phase with stock purchasing Based repurchase the X shares, current year. price Directors average

XXXX. year Now, I'd and provide quarter some like the for second of to full guidance

range range we second be XXX the of in the XXXX, For delivery the anticipate home new units ASPs to to be $XXX,XXX. and to deliveries to of XXX in $XXX,XXX quarter

SG&A improvement also as the We expect this a a larger half slight of quarter a of percentage in benefit with the revenue year. back in

in previous and range deliveries range XX% X,XXX guidance the be or to basis, to are full reiterating homes; an be margin our $XXX,XXX; to in the range in be on ASPs XX% of XX% basis. $XXX,XXX XXXX, the to For GAAP home on sales new year of selivery home of gross XX% of we X,XXX a adjusted to to a to

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

John Ho

Thanks of backlog giving roadmap optimistic existing our long-term into and us underlying a supply XXXX. by the great XXXX new inventory. for strategy Chris. fronts We in markets home industry, number the the fundamentals in a Landsea positive on to in scaling housing on record thanks capitalizing year goals a remain to of the profitable ended operations about a achieving Homes our the our the of with progress quarter quarter on of made executing first manner. by fundamentals visibility We our outlook our remainder limited the and of and for

strategy on Series affordable our value a high believe the more time. shareholders through while of of over offering for also produce great great segments performance Home our focusing a market, proposition We results the will

While chain to rate supply years experience the headwinds navigate of successfully our challenges. for the place these issues am ongoing confident have in industry, operational we and team with environment right I present to rising

the Builder are this for like entire thank accomplishment. honor week. Award is That our our the our as forward validation you all remarks. Magazine, look questions. with all was today. the we to Prestigious pride of members our by And Homes great Builder concludes the sharing team would the winner and us to to of grows. XXXX of I team for in I to for Year getting should future the the Finally, take company, named open successes put hard in call a we'd We in. Early for work now, a all company up has which prepared where Landsea like this

Operator

question, Instructions] be a session. state will Thank Barclays. question-and-answer you. we At Matthew. question from this Please conducting from your Bouley time, comes [Operator First Matthew

Matthew Bouley

curious kind sort clear, else can locks forward, for rate it of the was buying That's to lot do Hey, guess, of, the different move rates good in taking buyers Year you've helpful of a you to here? that elaborate -- I'm that went rate the sort guys ask to on well. of Congrats Builder validation on you. I a everything start game. color for of have peers or rate to lock of, and sort commentary. nice doing. the of wanted the little you execution backlog going locks. buyers, That -- sort there on any of, encourage people for afternoon, you to, interest strategies take, is going or of seen to would what questions. everyone. Thanks first guys been as limit the I you your after guess, Sure, potential kind actually approaching Thank just with really what quick this, and try you doing -- have, I on Award for

Michael Forsum

down, coverage. to if we'll for to this most whereby Generally, voluntary we're it's encouraging do that not really But it now. us do having Hey, on their its Forsum. question. them We take to Mike the and part, rates floats a moment, them it's in lock at buyers I'll do just really to a basis incentivize that. have anything interest provision Matt, give

here of anything or a anxious. like delivery are ones would buy to at short some kind little Others that out are they're as months. than to any wait. It's incentives to not that, probably help comfort just the closest mitigate it that where to going know willing still downs would for order playing other are doing said, I in get are actually guess, Some doing bit to of again, more But any be the through. couple next or to I and putting part, most we that

Matthew Bouley

thank Well, Its you Okay. color for great Mike. there that.

the so on one Second pre-interest I guess, QX margin, there. in accounting gross pre-purchase XX%,

XX%. to XX% at guide the held You

cadence that you Why should any are some implied, margins decline you. where I guess, So, model? in you sort today? we I'm conservatism on are as of just from Just the about Thank gross the of of think curious, color in embedding kind the there?

Chris Porter

will great Chris look because price a the that just as high of on quarter. of But pretty definitely just in, that this in Porter. accounting, this part delta -- next wrapped to We're for bit it's more purchase year, we've price to there We numbers up just wanted built conservatism offset two out Yes, towards it we front-loaded the question. sure we uncertainty we some bit. experienced clarity more quarter, the we pretty were completely purchase a quarter a Matt, a year. the back spread those we'll And had correct. finalized and the accounting have little the part through get back between the is little much that make little

Matthew Bouley

you. Got

trends of Okay. trying of a as No, thank on the some if just gave the kind uptick pace into we're sales and maybe can April you of for one just if of the through in get curious just last the even me you you speak a possible. the for -- handle interest quarter, into that. here Obviously, and And rates. for to sort result curious leading then March demand I'm the edge of to

any just you. curious I'm if into So, March those April? to demand of of you kind speak and Thank trends

Michael Forsum

had the again. consistent week, demand robust. very to Mike We and a this week last month would prior sales stayed traffic was I remaining as its strong the say it that is Matt, that. month again,

country. seen our our abatement all any communities in interest the at across homes our we in haven't so locations and And of real

Matthew Bouley

luck. good and everyone, thanks, Well, Wonderful.

Michael Forsum

Thanks Matt.

John Ho

you. Thank

Operator

question Riley. go Alex Thank Please from Instructions] ahead. [Operator B. you. from comes Rygiel The next

Alex Rygiel

Congratulations. here. great quarter. quick evening Couple of and Good questions gentleman

How going? the integration is acquisition, on? activity can the update thoughts our going? how First, And so is Hanover sales product and on you us about

Michael Forsum

we're from Alex, that today very notch executing level or around top the even inherited out better to think to and Hanover. Hey, Thanks Mike. complete. is and communities the integration you continue you're I expected or I trailing for will is as on through question. finish happy left area, at in now Landsea up, sales that highest Builders if it's proving Nice the to that be that Homes conversion with the up see some Homes team community so there, to you. say with The Metroplex we we've now to respects. level from at hear that very, acquisition the The Hanover Other we Landsea Hanover. a as driving and those Orlando than winding would But within the there are handful offices. to we Family perform signs

just at and really we've So, to this, Hanover done, team one every This We're getting strong at. time. give highly management was that the went the houses I of this then and communities conversion will probably and desirable, praise products along. we're them at that with happy. team and or are here the quickest highly do high to our we're are The moving better out of, kind market conversion to the desirable worked seamlessly compliments remains single keep the things

And so how thrilled there. are going with things we're really

Alex Rygiel

you And broadly still communities? That sounds in speaking, great. then, sales are limiting

Michael Forsum

to looking If community of like rein that long be them so level, calibrating at a extending We're kind we're want that too the too really exposed in. our see are. out, to, really We be we roughly definitely and one past the or We it we so at. tail don't factors of, months that's and nine against production production.

Alex Rygiel

us can pace an the at question, sales just Legacy update York Last give Excellent. on of you New property? the

John Ho

left pretty we've Ho. in of I units XX a I the Hey, We units sell started John the believe March. sold. Alex, have only that to there. cadence deliveries XX is we good delivering of month of And this remaining have units

expect building to of be out we entirely that sold closed So, year. and out this

Alex Rygiel

gentlemen. Fantastic. quarter, Nice Congratulations.

Michael Forsum

Thank you.

Chris Porter

Thank you.

John Ho

Thanks Alex.

Operator

Housing comes Alex. Research your next Center. proceed Please The with from question, Barron Alex you. from Thank question

Alex Barron

are there? or I do going gentlemen. opportunistic And to how thinking something thanks guys just share you systematically is Yes, Is that about it that? more the wanted to buybacks? about in here ask you're

John Ho

still obtained This Alex. our of deployed our stocks which year-to-day. And to We've well is why question. authorization. believe continue is for it Thanks the couple that John $XX another Hi, as these past we We Ho. I think months. is million performed undervalued, successfully stock well,

this especially generate our cash tools I in that continue to toolkit, with think geographies return. one our as to something the is operations, be flow we have that with should these significant our of expansion quicker

good a that it's our to ourselves. use doesn't capital, obviously allocation to think away we invest a growth, of in we something and from continue So, take

Alex Barron

you then many months? affordable be XX if type wondering the region, you I Or Okay, was over of next homes to new operation? And also that more expecting sort that to could how guys expensive, you great. on dollar as the point? are provide And guys guidance far are acquisition, any as a is price from the looking homes Texas going just, million

John Ho

take the And I'll second question. over Mike I'll to one. for first the hand

you're January, On first one. the correct? made handover about we that talking the acquisition in

Alex Barron

Yes.

John Ho

Yes.

talking just believe, close closed year and of the we you're probably Mike, at about XXXX. was to about end what -- about, for the will XXX thousand. or that's so units it to expected we expect Texas? That in of XXXX And, year XX% I business the do So, in under

Michael Forsum

Sure. Hi Alex.

at just identified. planning not high that staying are that on We price you point

speak, a that there, we pivot that we and we idea as all production trying possible. employ into the actually of format out as format deploy production the country is as typical we what make with mission from or to homes attainable price it - would point we're to that semi-custom of that format across and Our executing our we're volume

in be will as we well. that so And doing Texas

affordably and had product, much be And than there acquired how more that's many priced and you types Texas. point product and multi-segmented continue Kyle pricing. have price we earlier in we've terms we'll we'll is positioning, its of the fact, In mentioned the in community that'll

Alex Barron

very you much, All of right. Thank best and you. thank luck. Well,

John Ho

Thank you.

Michael Forsum

you. Thank

Operator

call and the further closing time, and this we to session questions. would you. of Instructions] John Thank back for the Thank Ladies end turn to gentlemen, reached remarks. At Ho like we have the you. I [Operator question-and-answer have no

John Ho

you, to us joining everyone for to next Thank talking today you. we look and Thank forward our quarter. you call

Operator

you. Thank today's concludes This conference.

may your this you at much for lines participation. disconnect very You your Thank time.

Landsea Homes (LSEA) 3 May 222022 Q1 Earnings call transcript