Earnings call transcript Q3 2022

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Operator

Welcome to the Landsea Homes Corporation Third Quarter 2022 Earnings Call. [Operator Instructions].

I would now like to turn the call over to your host, Drew Mackintosh of Mackintosh IR. Mr. Mackintosh, you may begin, sir.

Drew Mackintosh

to third welcome call. XXXX and morning, Landsea quarter Homes earnings Good

Commission. of laws. the risks Securities like in to, statements forward-looking will meaning risks would begins, factors are the statements federal assumptions, These note described the Before uncertainties, I call subject to to call that Homes and its Landsea but cautions that numerous include, by change this within which the forward-looking securities uncertainties and Homes filings risk the with are Exchange time. Landsea over and not limited include

to upon Accordingly, subsequent representing forward-looking securities. statements not these should not you whether and and views be place any our relied except to forward-looking of circumstances statements do laws. reliance in on applicable be as forward-looking as We a as not securities should reflect events undue obligation date our were date, future any deciding information, as otherwise, invest new to update events made, or they statements or may result whether the after under undertake required of

Additionally, measures and this most the in to Home's can discussed SEC through GAAP reconciliations measures its filings. financial call comparable be website on accessed non-GAAP of Landsea

John President are Officer. and today Chief call Mike Landsea's Forsum, the Hosting Porter, our Officer; and Executive Officer; Operating Financial Chief Ho, Chris Chief

that, like the to call turn over With I'd to John.

John Ho

update over Good going insight morning, an and current and for forward. our results our go third our today for the of into joining we thank strategy give provide on you business as company's quarter XXXX, us some conditions

$XXX,XXX. growing $XXX.X during increasing with homes third our posted XX% delivered strong record We X% This the to XXX revenue improvement a with Homes line in in quarter the ASPs top produced million. quarter. Landsea profitability year-over-year to a

increase home net of XXX% We sales which diluted the translated XXXX. XXX million all margin third to points, share, of $XX or income a per over quarter gross also by $X.XX basis our improved

this call to quarter excellent preparing great and of members despite all which headwinds. to an a division, want for high level Florida for operational for our continued through attention thank producing at our team Ian. of managing Hurricane want to impact the executing results job such did I especially I

we total, job quarter to million division Those on to getting that homes Hurricane back were $XX.X the revenue in our the in into equating deliveries Florida pushed things had did due as teams closed passed. storm have In excellent an XX fourth track after Ian. our since

considered up get employees amount X/X injury, revenue. given are as XX% challenges, homes We and of still back no delivered Even of our serious the the with things in our sustained communities a running extremely Florida to these and of able our we're all hurricane time. short fortunate severity homebuilding and of

strategy expanding of markets into continue Our results. to strong show growth

rest continue with we, we the this exceptional along to Although results quarter, headwinds. the produced industry face homebuilding of

As has in widely difficult run-up our the a has been reported, sales resulted recent in industry. mortgage for rates environment

new The several higher and returned to their quarter from home the third purchase. buyers our new financing reconsider backlog homes purchasing led buyers many during in costs

were quarter down provide in sales compared several shortly, spur but details cancellation the environment, softer of X% additional year. our activity to starting result, implemented a backlog. last have buyers X% sales our And quarter to will and the was initiatives in Mike third our for of net backlog. our to As response results quarter we rate protect

sheet, think same time, liquidity. by in generating our market increasing responsive in we on marketplace the responsive on in - the important to consumers' any and needs. is being At by plan this staying strengthening focused changes the and competitive it environment addressing We conditions to balance cash stay

changes we our million. In roughly acquisition $XXX to assuming development. spend million we'll on And market we land all as no conditions, through this $XXX XXXX, and roughly to This go to land down into we'll XXXX. includes reevaluating spend estimate expect XXXX, move

With respect feel today's uncertain to are we asset-light our market, navigate great thanks our position a in nature lot we portfolio. of pipeline, land to to the

lots our pricing adjust and to landowners more ability agreement, we via the The reflect XX% with challenging conditions. work controlled option With have takedown that levels of market to the schedules.

able that to purposely option on no during longer In away provisions additional so make addition, We from we walk plan like lot deals market. we negotiated in that allow extended would flexibility being schedules with our that future lot times are in for agreement prepared these. takedown takedowns have that sense today's be disciplined to

XX,XXX we and do loss last from decreased are quarter XXXX that our and between than price assumptions have and XXXX control sequentially lower much this fact, of and much underwritten XX,XXX And reflects today's books on In levels. to own quarter. X% home our land the was

about we we So communities feel in good bringing to market quarters. the the are coming

Hanover synergies than Builders acquisition we our of is producing gross experiencing are Florida. faster Family in operations combining by Additionally, anticipated and our our underwriting. And margins stronger ASPs than

expect cost remain challenging about existing we While in a optimistic long industry our lack in at inventory home over near our outlook the points. term, company remain more environment we term. price sales remain of the and the continues There of the affordable markets. rental for be to And high. particularly alternatives the the the to

state provides. will for is we for millennial buyer cohort, ownership continue looking a a that which to and customization the desire new addition, by stability strong see In the home

our that true we these more focusing We By affordable home competition. and market. provide and advantage of our differentiator high-performance new Landsea clear the unique home positioned trends advantage homebuyers on versus in the the a markets through take offering believe a are to offering the latest automations competitive well by of homes, segments feel offerings is our

turn the over detail aspects call more I'd who Mike, the like business. that, to provide our of With will to operational on

Mike Forsum

and John, morning good everyone. to Thanks,

supply hurricane a quarter very rate issues quarter and sentiment I would company's did at sharp about chain shareholders. continued still in John's even of this execution for The produced increases, team job a profitable like an solid our end environment quarter. to our echo and outstanding this interest right

John which of doubled in have rates, the third of As the the than year. mortgage beginning order our mentioned, interest impacted was adversely more by run-up activity quarter the since

The quickly for but in sharp our environment a put to strain home has affordability, adapting are a more we created industry and has rates difficult this interest new increase on reality. sales new

stay are offerings for marketplace. We home our backlog our term in in overall cost looking out focusing to our value structure the on near while improve the closing efforts homes proposition, and to competitive and ways

to the have can and to activity practices adjust operational generate of today's many We needs meet buyers. levers sales to pull our

products can need to move affiliate, yet These the including they our with to teaming to of locks, towards to new initiatives rate value. on options be buy-downs, and our roughly are quick payments us attractive homes. We order the In buyer's represented pricing mortgage Nancy help pool attractive and financing that a upgrades incentives in. gross prepurchasing incentives financing X.X% payment, third include move-in used credits rate monthly produce Mortgage, lower quarter,

reductions, We ready remain cancellations. selective reselling focusing price and move on in inventory to on

remain land our In are forward making front. the and the sales addition adjustments on streamlining will the moving of focus to front, on on we tenets to disciplined structure the our be to cost core strategy

increases to housing last the incurred trending our building market. to have a we Over upwardly few significant costs due years,

reflect the we our sure labor be have prices and trade pay materials market working conditions for today's to will that softened, we and with suppliers Now dynamics. that partners make

way relief show costs their effects to of with current with build worked expect seen to the slowdown end this system. already respect have We the the the some on the associated process the of through back end and front relief up once the

the Additionally, between our distance which we diligently shorten through. is sales production improving further closings, and are working times to already bearing on cycle

the will the also point at our our existing in provide closing homes. for This focus In and fourth protecting a remains good quarter, which X,XXX momentum XXXX. backlog, ended quarter on starting

have quarter, pricing John we and are markets move-in finished As the inventory a - spec sale to with time incentives we the had to homes homes to to move-in were move starts who our respect quick seeing healthy for and on closer construction of we between XX buyers XX% under competitive of the At said, for close. ready and shorten date, and to looking where of in. amount should plan plan sell end

of to into operations have dosing way and through to veterans who our their been in these before outlook company have fortunate group of performed weather are the local heading by seasoned the quarter playbooks third the Overall, are storm. our are We running of our times encouraged the year. the a we and end

quarter $XXX in and us a to I worth little in million deliver XX% in last backlog quarter homes in As of value. a This a over year increase quarter. of volume over third in the fourth value, another a XX% dollar increase puts profitability position have we mentioned, great X,XXX backlog,

conditions, and lot strategic the surrounding a and interest still whatever the Homes Landsea economy of right has for operational housing expertise there's the short, In direction strength financial of while next. market comes the rates, uncertainty focus,

With call financial I'd turn provide like about Chris, this that, who to our will results to detail over more the quarter.

Chris Porter

and Mike, Thanks, morning, good everyone.

improvement results and XX% the over delivering $XXX.X are the pleased mark past As revenues, billion we $X quarter this year-over-year and $XXX,XXX XXX, was a deliveries a last by our home increase over increase driven average The year. X% putting last improvement with of in quarter, in John revenues quarter third a said, million to for selling XX% the price Mike third year, us year. of in

with a more contributing balanced show across to of California Florida Arizona and our continues strategy Florida, XX% XX% diversification Arizona with performance Our revenues, and results XX%. California,

third represented This and our XX% XX% and compares of Arizona XXXX, California to respectively. quarter where revenue,

to operations we XX.X and produced York our addition, closed New that XX million remaining five In sell. only have homes homes in

more sideline totaled from from on sharp the interest as the the we X% Reserve. of quarter million New said, a counteract the year and to some in And felt a buyers impact, Federal Arizona direction waiting Mike in of seen XX-year buyers' X% for rates buyers of orders efforts. Landsea X% Mortgage impact needs, working as over has $XXX below from Landsea in this the have down increase solid and just of locking California payment including to cash momentum are mortgages XX% these mortgage address capture and fixed rate our buyers. and we've been with in last

XX% California that coming profile backline is income that average our of you Arizona of all Mortgage in these household with level divisions, would Across average is buyers at above credit score use and remains Florida credit in and as the and just expect. $XXX,XXX below, Landsea Loan-to-value buyers Texas are and and The roughly XXX. coming ratios strong.

an our rate last for slowdown quarter. communities, ended segments in reflected orders, net was quarter in the overall absorption with selling from Arizona, around third our two And The year. absorptions We XX the all of however, in community. exception of the with XX covered quarter average of the per up

XX% roughly to in XXXX. the anticipate close selling the concerns. sensitive affordability and Arizona to be most XX We with closing to continues average communities to expect year

margin basis For gross was the from on quarter which points basis excludes points XXXX third an basis, price In third SG&A to to quarter, sales home and a sales our XXX revenue. GAAP or XXX improved accounting home purchase capitalized XX.X%. of expense adjusted interest on million XX.X% and basis $XX.X the quarter, XX.X%

prior $XX.X SG&A with home XX% sales expense compares year of This or revenues. million of

We the to adjustments market continue overhead evolve. continues to to as make and structure monitor will cost our

represents into Our which effective inclusion the million, enacted which this tax were energy-efficient home expense that for reflecting of the XX%, Inflation rate part Reduction was the as in federal of third extended of tax of year. the August quarter credits, $X was law Act an

$XXX.X last year. first improved margin million of strong top period third $XX.X $XX.X the nine a Year-to-date The totaled XXX% reported months million, the versus increase for operating EBITDA $XX.X quarter the share. third to drive in in quarter million XX% EBITDA prior was rate over XXXX. and $XX.X growth, increase same XX% EBITDA or million to line The company's income helped was or net of per million year - per $XX an $X.XX diluted the income $X.XX net last share. lower tax year million compared diluted for

adjusted company of increase net income share, basis, million diluted the an quarter $X.XX On last of from in or the year. an third produced $X.XX per $XX.X share per

our $XX million ended liquidity, includes We million $XXX with availability in million under revolving cash to sheet. credit facility. unsecured in the balance and $XXX in Turning the quarter which

increased by availability and facility relationships to quarter, credit to committed and lending our million we remain borrowing continuing expand the our During $XX capacity.

comments, enable this We we position to strengthening strength opening of As sheet move balance stated will into as a times. preserving his in we liquidity in uncertain XXXX. on our and focused us operate feel these are from John

was net was to and $XXX.X We debt the net total $XXX.X capital The ratio with finished XX.X%. our the million. debt quarter million debt ratio in debt XX.X%, of net end capitalization and at to the of book of quarter

generate to As a our quarter, we we expect level. closing and cash strongest leverage see enter improvement in

guidance the provide to like the of I'd impact rates fourth may change, estimate with Now continue the their and market based inflation current of interest This as course, today results. for best overall our condition as some to on is, quarter. guidance affect

recent the range to and sales in ASPs XX% in rates sales the XXX,XXX units of interest anticipate in of to margin to delivery with range in pace, around anticipate fourth With XXX be new XX%. and range hovering the home And gross quarter change changes we adjusted deliveries be the GAAP in XXX,XXX. be home to gross we to XX% to margins XXX

prepared and open to now for the remarks, call With like up that, it we'd questions. concludes our

Operator

[Operator from Instructions]. comes And Bouley. Matthew our first question

is line Your open.

Elizabeth Langan

morning. Good

Langan Elizabeth You Matt have for in on today.

in that are incentives seeing little started you those seeing just financing affordability asking incentives what put specifically Arizona get momentum maybe the about any about I you'll to talk pressures know mind kind And thinking talking in to about in you are the you price generally you're if Would anticipating given areas? price the mentioned place. that have on I California relative you're incentives. future? how maybe and specifically, wanted So that take financing that in you you potential reductions? some could more discounts a about bit need of Or on just to you

Mike Forsum

say Mike. In a it's stronger that I others. this would markets selective incentives for Elizabeth, price us mix Generally, are reductions of is than and some currently. really

get that closing. draw terms our Some the to are and we're traffic responding in differently different to to to ability making adjustments of

around buy need most part, place. the a really programs any we're of that followed fixed offering, for program take incentives sort our through payment a then up to lower allows specifically of mortgage and that around price seeing a through that we're rate So down adjustments sort for monthly

nor adjusting we're Again, need that one have But the reductions we're to country. they because with that incentive trying that's successful gone across our locally. very And the environment. our to to specific local and responses is happen wholesale teams where competitive listening business price that them we level, local, at there's haven't to provide had be the the unique tools it's we and against

Elizabeth Langan

bit little kind of to touching potential how about really was talking Would fall? I kind a that the about XXXX. you're thinking then kind how write-downs most there? Okay. of of mind That's between But forward of little if And like you helpful. been acquired land on a risk land and continue land XXXX looking of or and that on bit are and impairments. to option strategy those you you said recently, the your about talking that's going know relative the kind prices prices acquired more

John Ho

to of back that. John deals to - is this can all that updating Elizabeth, I would speak gone we've Ho. say we're and underwritten our I land market that conditions. and current

that deals away deposits. and in are up we've at tied certainly of been been terms from have might walking We looking

lot of diligence has might we and have that expenses spent. a date, due that deposits to Fortunately, been refundable

or pushing together, canceling So current don't market under out them they make all deals if sense we conditions. are

were mentioned, If extensions, to continue go we have price market - owners, reductions. the ability, to ask we to for back worsen, our land conditions as

the give some to will had reductions to the a of land I in have price we At write-offs. to look some willing think owners But lot get given lot our them. building haven't not in walk their date, of will that of if extensions future. - away time, in options potentially we from are our then same options that any we cases, a those

Operator

And Rygiel. comes question our next from Alex

open. is line Your

Alex Rygiel

questions guys morning, nice A quarter. of here. Good couple

if around kind with the think quarter average we your in How looks selling fourth it out into of quarter. look the York, for start selling XXXX? kind we is was price New which as you average price. First, it like $XXX,XXX, $XXX,XXX, exclude right ASPs about The was let's guidance do of

John Ho

is this Alex, John.

I spoken think before. have as we

New properties, segment. and California selling really higher first how ASP markets, And out and - Our the these the focus entry-level mentioned. in of of as to then has move-up can our see in also York you be out pivoted you and continued particularly we've

and we're really as markets and portfolio our and growing business diversifying that So business Texas Florida growing us. like in for our

percentage that mentioned, a in down see our little ASPs our business you'll bigger reasons come driven of like growing mix to lot it's those because moderate to as of Chris represents really markets. And overall continue strategy a and a units, and bit our for start those of probably by

Alex Rygiel

a quarters talk can last bit as to couple helpful. or relates October in And then cadence of of new about couple That's sort very or it last maybe of months, of orders September - you little particularly August? the

John Ho

Yes, Mike take that. I'll have

Mike Forsum

be don't through, communities, deteriorate. market continues seems all of primarily to Sure. marketplace. the Alex, as is Haven't ground what through at Phoenix, for well in in our we're California. for, fairly to that for us call, zero up And seeing holding coming in well. I Central really think seen as would that's the Obviously, which information Florida that strongly the And I it price correction

So said itself adjusting and through, is market we're each each unique flow I as and unto earlier, so accordingly. its own sourcing has dynamics. we're that Elizabeth to again, And

Alex Rygiel

includes then a And for helpful. openings. new That's number community of outlook your XXXX

here, XXXX? do near-term kind it about think do of Is quarter So kind Is absorption sort higher? absorption was for is understanding something good obviously you that's net think Is I guidance. that you like targets What And X? target challenged the it appreciate you? about of for of How X.X. it this somewhat market a X.X? a

Mike Forsum

Alex. is This Mike again, Right.

year, the up issue. that think different come of flush I end the seen some the some would call type year, inventory, really against dynamic towards the fiscal as we've seasonality, our been would has been of that say end although we've we've is out of I the created a cleaning seeing seasonality there has I what their competitors and not

past. - it as the in So has been

we a us, our natural there's is flow to maintained around to X.X. that think be believe I need that that for and that generally, communities roughly

maybe nice, in We has Sales flow a our in natural X.X, of that terms organization. of You business do lubricant everything that's it. a can and believe straddle have the to momentum our community we a of at absorptions. sort of that do terms X.X, are the in of

X.X of really we so and our price maintain business And sort to that around gear incentives base. our offerings, around roughly discounts sales

Operator

And Carl our Reichardt. question next from comes

open. is line Your

Carl Reichardt

to just the XX clear target Hi, And 'XX, for a then good looking morning, end or target? is communities be about to this, you're I target, want that guys. period an that as average ramp where markets? the significant. most major lay Texas out that be to the individual markets, is But does growth the place going I'm other how assuming a three is XX between

John Ho

this an John is Ho. average. It's Carl,

So our growth that, lot Florida then and growth is upcoming obviously, in from a in of Texas. our

us for has a So year year. markets our really reflective we'll growth open year this communities that more have been is in as next particularly obviously numbers. of those And in

have We're and also well, as too. California in maintaining our that Arizona we scale

nicely between respective So with catching Texas up. probably markets we each pretty do that those still of see distributed

Carl Reichardt

said you ends. terms end labor a beginning availability. process have what about the some the Can define You've of where in front lot front-end up of ease construction the other process, builders said of to

trades? trades we frame the at we So or is getting Or this starting to frame? see all? mid-end movement any finished Are in of kind through the to are

Mike Forsum

the a building cycle pull it's to for turned of two sales terms lag holding the start Generally, overall Carl, coming we a you months, where they've a within us, on drag saw components a has the That out in could two it's which One COVID, to in adjusted which three normally huge weeks. buyer in escrow. a is - huge into some Mike. permit end. meaningfully there's back was go through cases, from us. time for In and city and the front

done cities that's and So check quicker news really, coming we're and inspections really online faster. being great seeing is happening plan back

great. some the seeing in time from really rough. also our standpoint, trades in is that's the been We're around that positive So front-end cycle adjustments

terms those either cycle trades a So And plumbing, lag your kind things time with to time back of your your start front-end it really house really electrical, that are it. going capacity build up be really head giving of as you real down then the catch further those your HVAC, there pivotal framing, or isn't up. into in concrete, can strong

of instance, our then back site they're the pretty site, to pressed So guys get on going that our follow-up the number bulge scheduled itself. on one. of side just getting to seeing carpentry, a - really and foundation in which What just the huge the out year the concrete, we're trim through we've experienced is is And next stretched right for is where finished finish, now, the end a amount the our will we trades - there's when rough to that electrical victory the they've on through. coming seeing consistent the the on rolling into hope some - plumbing, actually alleviate we're been inventory and

going For there starts been month. through roughly years, two X,XXX around to instance, perspective. X,XXX. roughly let last In back about has have That trimmed sort per some down me the just give of Arizona,

that's So trade pressure of pools a out off there. taken the lot

starting to see And we're come through. that so

Carl Reichardt

color. my question. That's - then really just helpful And last

the as want in you or have you specs guys time? a quarter. said look you X? had you per end Would ideal What's finished of the you store for finished normal think your one any number business to I specs XX at

the a kind you in environment? what's Or normal of number that target

Mike Forsum

finished standing euphemism A is a spec is Yes. This again. Mike, never which is inventory, -- for

Carl Reichardt

it is. Yes

Mike Forsum

love is a so really the finished. answer have unoccupied And house me, that's there. sitting to for zero. We

XX for of that's That's the specs kind where three, maybe three natural talking you're of with if like on we're through. starts been case. depending rolling had there through a you're of going we or However, generally out if to X, about spec the line, system, a possibly sort units that and That's you at, feel us. start when upon always

a attached, starts you're to on a in inherently your six But to of because spec have a you're course, is building. that to higher have XX always going eight if starting level community you

sold, as to the a always of not will some sell particularly don't those units so as And be others, inside lag. and quickly building seem

escalates And or that sort so of elevates that inventory.

So we it like WIP. to drag heavy. We us, our for inventory monitor don't on

It's capital. an use efficient of our

have don't get if again, us, we more were okay, for that. to but living or want are people that's like three them So two in sold. want you much a maybe five than houses. in that We our community We

Operator

[Operator Barron. Instructions]. And next Alex our from question comes

Your line is open.

Alex Barron

thank I X just ask about saw York. only remaining. New I lots you. briefly there's Yes, wanted to

So I think by some be you guys my Or and count, that means Is there's closing only that five last going that there is community beyond are homes your out left to to sell. that? state? future like

John Ho

Alex, this is John. Yes, that's correct.

one units, now. and XX got building of on to left probably sell, have as X. And and of that's actually for five the We four XXth only left,

Alex Barron

guys are this that I'm But saying exiting is after done? you market Okay. building

John Ho

would be This capital, then business. last the reinvest asset. correct. the our That's would And our return horizontal we into

no be New in York. will We longer

Alex Barron

it. Got

that What future? experiencing think more see price also a declines, there's that? you just to this orders I were state. different this somewhat and I the of And in that your was what's something sign you Or need about causing Arizona do sharp state? this Or down You is mentioned market? is think

John Ho

John. is this Alex,

active there. was of more BFR the SFR a and there Specifically I Phoenix or with market. much market's lot faster pricing more And a ramp-up declined think in very, also it's well. as the given Arizona out also very around community competition. There been commodity-driven probably that There's market,

taking their why lot that's end may of mentioned. up in coming of are through of reductions down, that's that also has of really marketplace. price be like I at year homebuilders lot and of drastic there be slowed the might this inventory A that year, end fiscal cleaning Mike this that the a specific think more bulge

Alex Barron

ask were quarter? if building approach what could and rising long guys you that? on for quarter? spec everything to positioning Got And your build-to-order what interest as And are is in it. general your versus given in What your starts And going that's times I were the how and rates, one the build more. starts

John Ho

well. that the I remarks this Alex, again. in for homes of align John don't sales can were our quarter prepared earlier but disclose we that managing as is XX% We say starts. of level our to the starts spec mention under did are our with just that detail, Mike

believe we do efficiently. our we business continue that maintaining orders, as the sales to in to So per believe per minimum is because we absorptions community business month need run a X.X through lubricant our volume at what

Operator

And have we Alex question from Rygiel. a

Your line is open.

Alex Rygiel

Thank you, My been questions have answered.

Operator

And you. this questions time. queue Thank no have in we further at

Chris Porter

Well, thank you, everyone, and appreciate today. we for the attention. joining call our

Operator

concludes Thank you attending. That call. conference today's for

Landsea Homes (LSEA) 3 Nov 222022 Q3 Earnings call transcript