Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, greetings. And welcome to the Landsea Homes Corporation Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to Drew Mackintosh. Please go ahead.

Drew Mackintosh

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

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

upon Accordingly, subsequent representing forward-looking statements should not views be any relied of as as our date.

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

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

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

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

John Ho

our for Good give our and and XXXX we go the morning, our the today industry us and thoughts you and year for full over outlook fourth thank as joining company. our quarter results on for

for margin We increase and pretax X,XXX of of per basis fiscal year, home $X.XX over Landsea the all to year for XX.X%. XXX Homes of earnings points XX% our sales and expanded a closed generated $XXX diluted million billion company. total gross XXXX during $X.X records income by revenue homes representing over share and XXXX,

in book $XX.XX. accretive increased shareholders by earning We through per repurchase share and value our to an manner our program our capital share to also returned XX%

maintaining markets, key faced to record-setting overcoming sheet. on want growing our this executing milestones team plan. a to our year I presence our them We industry thank contributions homebuilding financial while applaud operational and their these our all while for strong challenges and achieved in balance for business operational the members

terms more This in who buyers in XXXX dynamics backlog in the was in a year it are demand change rapid prompted our buyers purchase for in confidence. environment cancel market a which home record-setting to a challenging become caused in due a contract. year cautious profitability, became also of buyer market new home the subsequent rise a rates mortgage While decline more was to and to their and in

As a sales significantly our change this is compared incentives dropped by in have in brought and result, adjustments off and the in momentum and a quarters taken on to as activity net the the to order use prior regain year. of We fourth the rise affordability action interest third reaction the to rates sudden believe the front. natural new price through

December, the this Fortunately, Year. market see begun we starting some in improvement and have carried conditions into New in to

and factors. volatile mortgage changes remain subject macro near-term rates to expect We to and conditions other demand in

by However, the the success we our sales encouraged year. are efforts to start of

and an more sheet placed generation. environment, balance In have demand cash on cost to increased emphasis reduction, uncertain response we strength the flow

that we market the and the vendors In to reflect with new our prices terms contractors reductions, suppliers, paying negotiating we of realities. proactively are cost are sure make

way slowdown works significant last as its the experienced have input through years to the expect ecosystem. few over We trends homebuilding current the cost those and reverse inflation

increased We're and size on also vendor factor favorable that in establishing suppliers agreements working more national our our scale. with

away transactions a remain from and efforts option and from acquisition market to should to away have typically take disciplined with longer adjust current no prices walk rates. longer walked land hurdle meet While our during agreements our several we correction, are they land prepared

also to headcount our operational X%, would overhead approximately by efficiency improve changes and which We structure, made reducing cost our have expense leverage.

we allow move headquarters over Texas, to Dallas, we our state. homebuilder. move in announced more provide Southern time our California, should cost also a earlier savings relocating are to homebuilding to that that as national us from As our this corporate effectively a signal week, will presence operate growing should that This commitment

end balance the the to our the at low respect XX.X%. With ended debt-to-cap of at we year range targeted sheet,

million in us of our under $XXX credit We available also of million liquidity strength. revolving plenty facility, $XXX a operate position cash giving had to and from

XXXX. pushing credit out extended facility to of also the date the maturity We term our

in Our cash a great generate capital to from optionality current put relative debt, additional our reinvest us operations, in which more return us or down to would XXXX, shareholders. for to pay plan a should favorable development to operations giving position reduction calls opportunities land and acquisition arise in

Our buying our Board the share excess of Directors recently option giving added of approved with stock $XX extending repurchase us our cash. million authorization,

the high-performance in have next product of great and XXXX of standpoint lot appeal both our a a that from a accomplished operations, country homebuilding to teams, some the the drive by and has execution the continue in established We've operations scaled strategic presence to well homes. focus our level. thanks us to poised financial affordable our We our best and quickly our to markets in

and stability arise. gives to strong during advantage operate take confidence should condition uncertain times us opportunities with the of Our they financial

result, Landsea As future of I confident Homes. the a in very remain

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

Mike Forsum

and everyone of closed homes quarter representing quarter good to fourth increase taking XX% closed John, morning the the over and to the X,XXX. our fourth year the XXXX, total XXXX call. on in for Landsea a Homes Thanks, XXX of homes

communicating did with buyers confidence their the the teams and job quarter close throughout an and them home. excellent giving backlog Our on to

more our the strong from quarter. be order aggressive focus to sales Backlog its and line produce limited quarter us performance priorities the also which our top a for on the operations. to for growth conversion cash preservation disappointing were ability front, and helped top and flow It led

However, Year. began we see mentioned, which into activity order to starting improvement December, in in as the has carried John New

improved of in January pace demand their our can community, closed margin to an to per order rates per attributed off factor equally and coming have community pace highs, Following has net majority important incentives X.X community ability be improvement X.X a responsive to the of backlog. per pricing fourth we absorption but more we've Part and with accelerated mortgage been seen X.X February. in our be of now our that to high quarter's out

new through base that price most been affordability have And budget. combination are that trying solve fits buyers able understand some at that for financing there of sign the markets and and price. their believe is continues clear be monthly this homebuyers our address elasticity We reduction we in their a to payment there that needs a incentives. We to is motivated right to demand that

rental to enough seen buyers We now near coming from to Typically, single-family their an at are inventory completion quick communities situations want who that in demand. a satisfy uptick in these home. we own want and our have or buyers have recently close, this

noticeable positive Another improvement development a recent has in the chain. supply been

the availability as days from activity. down have have in better labor materials and peak slowdown come times XX gotten with their Cycle

front homes see closed. lead the While end we most to is on shorter on times product we are get this key improvement that need starting construction of our of process, categories the to

our more our of great of our supply reliable After delays and I turn times and and for the current company. to tailwind be and us more will industry cycle of better years direction a optimistic about will our quickly. chain a the industry inventory Overall, disruptions allow am state

After shift improved, economy two difficult quarters are and marked sales a picture. making, employment increased resilient responding the real in marketplace. Buyers has we by are are to pricing to a incentive a we the cancellations, thanks confidence see and homebuyer sluggish and to and starting healthy adjustments

market have excited in, we to the affordability about share, our are opportunity the homes differentiated on focus We markets in and high-performance future our thanks and to we and an believe compelling series. gain we're

that, the guidance give financial will quarter turn our more results on first outlook. who With to like I'd Chris, detail call provide and over our on some to

Chris Porter

and Thanks, everyone. Mike, morning, good

revenue, New X.X% with and operations. million we $XXX move increase quarter, benefits XXXX our generated show sales to continued York over For along the Texas Florida our as in fourth increased from into a

net $XX.X million, for diluted $X.XX pretax was income diluted share per share. quarter in in to XXXX. $XX.X quarter million Pretax $X.XX $XX.X million per This or fourth compares the income million while of was income or the and $XX.X

clearing price market. As and both Mike quarter price increased and solve delivered John discussed the earlier, discounts and as we backlog the for during high-margin faced incentives we

sales gross due XX% at to of points XXX compared these XXXX to fourth to items. home basis margin quarter decreased the end primarily Our

our primarily pretax income in year million, sales XX% year share. XXXX, though at the - $X.X delivered a margin revenue, downs. points revenue of income XX.X% last a where basis percentage $X.XX The slightly over in X% as net to of and over quarter were increase $XXX.X increase record $XX.X to home and results, a came over solidified we in or rate gross home million XXX mortgage per Homes XX% diluted fourth sales billion decreased XX.X%. buy as increase result Incentives Just of a

Florida New York and sales strong The delivered expansion and X,XXX the $XXX home where revenue. our results growth million by we in project $XXX.X driven in were homes in Arizona, million ASP revenue, in providing

basis home gross points to basis improved points to margin adjusted sales our sales home improved margin year-over-year Our and XXX XXX XX.X%. year-over-year XX.X% gross

the the in quarter, down homes community. for weighted at in net felt orders more from rates the orders We quarter in the buyers for sideline and the generated net XX% direction slowdown interest a from year we fourth of The as X.X per the absorption was in increase XX reflected sharp overall new last our impact solid rate Reserve. Federal on

For the homes per averaged community. X.X we year,

selling full year-end quarter expect community XX% the to to last count quarter to with grow as compared of communities, XXXX. an active for year. year-end XX year XX% our from fourth ended And of XX% the by We the up XXXX, average in we

some X% to these XX-year address and have buyers' have we continued work of in fixed from the below seen locking mortgages address including Landsea buyers' good To to with needs, Mortgage payment sensitivities, efforts. momentum

XXXX title by our title Landsea and enhance further our allows of the highest company to controlling began and also closing. service efficiencies level timing quality to the title buying homebuyers' Having us We own home and the experience. of process throughout in ensure maximize early

revenue, sales fourth was a In improvement basis SG&A XX And $XXX.X of the of home in sales XXX or of point home XX.X% from million basis million year, fourth improvement. XX.X% quarter last we our full a for expense the SG&A expense revenue, year. had quarter, or $XX.X point

adjust John evolves. earlier, said overhead as our monitor and structure we continue As to the will market

rate home energy-efficient credits. an federal of expense quarter million, of tax the XX.X%, fourth reflecting effective tax represents $X.X was in Our which the catch-up the

effective year, the For tax our XX.X%. rate was

rate For expect tax to and XX.X% we XX%. our between XXXX, range

quarter with our in borrowing down liquidity, and to healthy remain in the $XXX ended year Turning we cash credit revolving during to capacity. We a $XXX the an in continue expand also the $XXX and the million unsecured million balance availability sheet. million lending relationships facility. which committed to and paid extended quarter, includes we million our under additional $XX maturity After

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

We achieved net finished $XXX.X with and total million million. $XXX.X debt debt in XXXX of

the Our and XX.X%, total was net to ratio capital of XX%. end was our at ratio quarter to of capital debt debt the

impact as based some to units in home market as rates and to on be is XXX first $XXX,XXX. to and provide change, range first today With like new of interest guidance of the the with of quarter to results. ASPs $XXX,XXX for continue that the be we I'd estimate current quarter anticipate their conditions may overall in guidance XXXX. of our range the deliveries our affect inflation to best Now delivery This said, XXX to

gross home margins margins continued be to XX% the hovering XX%. We anticipate range, to incentives adjusted XX% price with sales around reflecting discounts and to gross in GAAP XX%

the we'd And up call questions Now that prepared remarks. now to open like concludes for our

Operator

B. Riley. Thank line Instructions] you. from from Alex question first Our of the comes [Operator Rygiel

Alex Rygiel

gentlemen. Thank trends a well. or it times seeing regional managing demand it you're Tough your little much nice and through seems like four very here, you territories? quarter, could across you bit but Mike, of you're that some about state John talk the

John Ho

Mike, do to? want you

Mike Forsum

financial our that really of in the a Mike. markets very I are say, December of nice Alex, wood through to of knocking our it's today, we and to had bump all coming of all we Sure. end regions where we that have have back our We're this demographics. but through into it And continues, the all on would sales our right of in we're to that traffic offering sweet type seems paces to of week-over-week back our spot drive rates of price about right communities. all and been our excited terms very at absorption and we're communities. recalibration incentives the finding between absorption what get the

Alex Rygiel

That cancellation rate in the then was And how the cancellation and And the February changed? is maybe fourth trends helpful. and about sort that's talk what December, rate quarter? of January,

Mike Forsum

cancellation XX% in our to the incentive between market new in forward time, we've that other particularly as extraordinarily in fourth been as structure. Arizona to in up high. But general. XX% X% probably the Alex, back ran the We're range going normalized between under has to XX% since in markets. XX% pricing We it that our down and basically Well, quarter, ranging close to was

Alex Rygiel

that can you build of strategy a That is then the quarter? bit And sort of number versus And very construction. to about talk little under helpful. homes

Mike Forsum

have around XX total completion. around all or we XXX dispersed around right approximately construction, or houses nearing of our Well, now, under so That's roughly XXX communities.

roughly average, not more some say, a So others others. than less X-ish, on in maybe it's would lot, I and around

But are mostly in transacting around what a to favorable a we're locking XX period is resell like XX responding is This market rates that our in days. market. of are interest the them. is to Most that buyers of finding

we So around sort talking of are those processes as, lot of maybe guess, some to kind methodologies peers that. of I strategy same and our it inventory about sales. spec exactly a what deploying do We're of industry see

and sold that within to XX successful have a we day XX in that period. if near we're getting closed completion, highly So house

Alex Rygiel

That's very much. you great. Thank

Mike Forsum

Thanks, Alex.

Operator

Thank you.

of Our comes next the from line go from ahead. Reichardt BTIG. Carl question Please

Carl Reichardt

guys. count. did morning, Good lot my about Thanks. one I Alex, the just of but asked to questions, want ask

X,XXX taking the or this So options on I developed? be might lot finishing 'development guess down you What either out percentage what fully your of as owned. your those own And it's to think are spend year stuff a already? what's

John Ho

John. Hey, Carl, this is

Carl Reichardt

John. Hey,

John Ho

be own, about of within months. as that's to And lots So really lot our we've we a on is our home building that the goal XX lot - count. that's about shared that before, total XX to XX%

to time say own close So down lots are of have very that I starting those taken that and on would are we period. homes most within

to be it's Anything entitlements require down that more condition. require a that taking typically of we finished [ph] would where in have development, land or used more transaction closer we'll structured when lock

challenged, on in year, still our it As relates I think execute anything so we still remarks, on. our this we'll to shared executing sort options whether meets prepared as that we Anything of with believe our underwriting whether guidelines, some we sellers the renegotiate to that be cost, transaction that, reengaging structure or sometimes may it's the well. by we're and by of pricing and landowners believe pricing the

the fast probably So XX% our with expansion in XX% year, say, this be XXXX will that to land this spend range I down Florida. would overall given year how grew in in we

Carl Reichardt

from the did quarter? fourth appreciate if what did, option the I were you then note, charges any on And associated? walk And you detail, that thanks. just side John, this contracts

John Ho

walk We have the in the in charges quarter. didn't any from didn't fourth quarter. any fourth We

Carl Reichardt

in among Newark what you And on just I think will for but roughly, in geographical Thanks. and Texas XX% Chris, result that 'XX. share/ Is coming, that you community communities 'XX that do said you count obviously, any think hit last geographically? split mix of XX% as Okay. just significant adjustments in I know, going Obviously, to if then the be your Thanks. question, growth, - is away. But - terms target might target

Chris Porter

we're different on speaking, be balance with had end three down, Yes. New but generally maintain generally left split lots trying you went York was It Like so to as speaking, only of be more New But - mix. year year. between regions. the the the Texas the same will we the come York. in of that it towards the the said, same it about end But will will about at volume.

Carl Reichardt

Chris. Thanks, Thanks.

Chris Porter

Thank you.

John Ho

Thanks, Carl.

Operator

you. Thank

Our go Please line Bouley ahead. next of from the question Barclays. Matthew from comes

Matthew Bouley

It January questions. in Thanks pace of some everyone. color on the you around February. taking sales and morning, there, for gave the was year-to-date Hey, Question helpful trends.

there moved data. in we've and pullbacks lot you've clearly, as your curious, a Just with then seen seen have a in kind higher some it, call of peers strong to year places, of and the mid-February of start the rates was the overall

weeks? into you can I'm in you of get of what's kind guys curious past the leading trends, has And some with how market - Thanks, very incentive this if of the been How couple evolving harder? playing the the edge been of that, specifically, into you press having incentives were little that a layer pulling kind now environment? dynamic into on is can guys. back conversation to on and of

Mike Forsum

Matt, Hey, Mike. sure. it's Yes,

I not year, week decreasing weeks abating as that up. was had last really have we would by company, before. say, well forward, price decreasing decreases moving question. this as mean saying me And one our week begin probably incentives probably like kind of but does just I history more currently, go by had since absorption we of homes our the our it are sales Solid incentives. keep fact not around what the let and if trends seem the are we our as But rates than that to and we communities best the sales of we've albeit

so and were to started moderating, kind and since building then of been of that found We were through and sort to that they point. around as it's we the against coming or what the of and extent found of we sweet sales first feel were the bottom the January, week that spot December

And larger in the make actually absorptions. course areas, past. we're we've get the Orlando, So increases, have communities. through get really, company. But have its cancellation in New pricing, like if incentive some to come corrections we've increasing adding at our cancellation. the and we're where had albeit we're came other the that cases, Year rate some to North they par see those bigger around we some in adjustments a prices – is has high able - the getting of to begun, probably were then in as were now we price did retracted. and into reselling And still more We particularly the what minor through And from still price some

to that feeling it. new think, I is looking rates they're They're is a and adjustments. made, price are again, around but are market X if not they're on the X.X. The some with X-ish, going pricing, at normal, handle back resale we're So the adjusting looking They know it's seeing that that very which adjustments radical low. being you be that to at consumer not will, continues to

options their So are limited.

out people rental seeing the an year, new rates capitalizing They've They're are there leases coming to And on and up. we're market. I think rentals. into going And been we're seeing up, seeing coming housing their that. of this their they're for as jump opportunity a

I probably to can will really attractive products we to though in smaller period. to that would wide which that that you a points, lower XX say of expect. attracted believe we price square day But array them. And that inventory footages have XX we that our the we and more have are available deliver

quarter We're on looks how what all, optics wood the excited in or from that we all the here we're least at the next [ph] think have future feeling the I about about good like but so. pretty So we're knocking has it continues, in year really commenced.

Matthew Bouley

Thanks for Mike, helpful. that. that's super it. Got

you're the you've heard So the think earlier then gross Or too any one a know extent incentives, that to kind I at reducing of reductions a QX, gross the don't see in coming and say I I of beyond margin. starting cost some visibility it second John at to but are you some to on through. To want margins say point? getting early stage? is kind bottoming this guide to just of you been

John Ho

Matt. I too early, probably think it's

provide much not cost several year, the really benefits reductions, more we on We to incentives probably this fourth of how quarter. of but continue to will quarters happen some of depends that's throughout And to the need going third quarters. next probably start those in seeing latter the and the it

So half and if there's this the in see we we've margin year. latter year, we'll next wait certainly momentum that continue goes. for then quarter some how see expansion of the have to in think or had an this to But I this two opportunity

Matthew Bouley

luck, Thanks, John. All everyone. right. guys. Thanks, Good

John Ho

Thanks, Matt.

Mike Forsum

Matt. Thanks,

Operator

comes Center. Barron of Thank Alex the Research Please go ahead. [Operator next question from from our you Instructions] line Housing

Alex Barron

ahead don't like, for Yes. Thanks, talk I lots. of if over I could Right I'm going kind you points. X,XXX of but about kind see I of curious can the you was give Texas kind region. guys any gentlemen. price path look hoping backlog, see us what now, do what that's to the

you going think but I'm to XXX the were million-plus change. if in past, I to the that's in wondering range,

color in idea on of we or an get type are to it's of whether any guys next this of Just what going? run year year, later rate, some terms expect should just where you

Mike Forsum

level bit points You're product spectrum of straddling Sure. and by the [ph] be the to a right. called Thanks the the full of offering way. there Xs sort about The and Forsum, close little is – the But That's our side we within on lots. Anthem first-time other will price from to to community Xs our move up. It's question. for what roughly, have a that. is X,XXX community That first-time, Kyle Mike of entry maybe

go in our and opening summer, and year development things in should into of really production into community be and coming sales If here stage. possibly we're at by currently well completed vertical, up the to XXXX. the looking all starting We're end from then fall. Lots by early full hopefully, go the

Alex Barron

it's - product it different if to the units to Got many how wants me, many blast, not if it. available? how are types And annual it's going going if full what's or roughly - be

Mike Forsum

and online, sort upon is full balance would X at a of itself when be out and ones running depending in be probably program of up time to that coming off-line. it so what a out and going be and or we're it's given communities will swing when coming Well, year of one's a going that collectively, what X couple running, hundred

about range could XXX XXX. to it So from

Alex Barron

Got talking current rates and down rate thinking thinking raising the interest environment, about How what forward fourth quarter. in Fed you kind to? the rates saw Or about it? about guys the it. in are much kind you can we what's buy are of that that X%. did of going stay strategy? And How is your you still if guys above How

Chris Porter

Alex, high guidance. it time are the Yes, this for. overall continuing down Chris margin Xs, buying mortgage Xs, very on We're those we chunks, Porter. buy low to be and just Typically, within is depends and rates into we're working the the XX-day seems size that well, and our to buying and very,

we And continuing the where there as guided our buy so kind rate those see I that mortgage quarter, to that's is packages. in guidance have of really think downs as priced for part into of first you

Alex Barron

Okay. Well, thank you very much and good luck.

Chris Porter

Thank you.

Operator

John Instructions] for [Operator would to Ho, comments. the like closing CEO, conference turn you to questions, over Since I further Thank there no are

John Ho

speaking everyone, our at to quarter. to you, joining soon call you Thank the first for look We today. forward our of end

Operator

you. conference Landsea for Homes concluded. now has your you Thank of participation. Corporation Thank The

You disconnect now lines. your may

Landsea Homes (LSEA) 7 Mar 232022 Q4 Earnings call transcript