Earnings call transcript Q1 2023

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Operator

Good morning ladies and gentlemen and welcome to the Landsea Homes Corporation First Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded today, Wednesday, May 3, 2023.

I would now like to turn the conference over to Drew Mackintosh from Mackintosh, Investor Relations. Please go ahead.

Drew Mackintosh

Good morning and welcome to Landsea Homes first quarter of 2023 earnings call.

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

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

Landsea's Mike like to today call Chris Officer. I'd are that, Hosting Operating and to John. With over Porter, Chief Executive and Forsum, Chief John turn the Officer; Chief President Financial call Ho, Officer; the

John Ho

XXXX of results us Good go provide our we for quarter for and our overview of morning the joining today an operations. over first and you thank as

timely holding higher line our our did of teams and in closing job the sales as number Landsea manner income home on sales guidance, quarter, first the of homes strong delivered previously an of stated Homes net per delivered came million. while we diluted share revenue home the profitability. margin results culminating $X.X Both earnings in a than average of on gross in excellent in the $XXX $X.XX million or of homes

is quickly of we and operations, is we a our to We doing changing operating time which than respond cash testament market to our typically also the when generated ability believe flexibility we bring the in conditions cash a from models. more to use what

better XXX buyer net the the better and as a aggressive quarter quarter fourth resulting sales a mortgage limited in rates net pace of acceptance on first quarter on April progressed, got activity traffic generated in conditions orders improved conditions inventory, of into the to relative order pricing of communities of sales. the Both XXX and per XXXX rates per of month. orders month. orders of new higher led the X.X for combination home as X.X a considerably as Selling cancellation and remained stable sales pace we our Selling to community at more existing

a perspective, thanks is demographics job new we the and favorable inventory. home resilient market aforementioned believe From existing macro supply home in to limited shape, the of market, good a

the so first market which overall consistent. we remain move in can long quarter to as buyers our makes attractive homes continue We a sales markets incentives We pitch. array to fundamentals compelling in motivated pricing housing believe with financing ability fairly and as an to the with incentives and do of offer our demonstrated continue ability in and to see adjustments the inventory our for find

quality, and Our economies better growing to home on scale buyers focus for attracting by We the of options. in markets operations at this path higher achieving the with affordable remains local our best is shareholders. high-growth our returns level select believe new generating

live. giving home of millennial and company, place just appreciate affordable for true our be This is technology smart continues a the to home price. high-performance a more Gen differentiator Z home buyers and the series the at home offerings as latest view functionality great [indiscernible]. than Our for our and to We especially

We balance of shape. with will these our years around our home capital financial sheet, drivers to come. respect centered market [indiscernible], our be million ratio understanding primary quarter they With have for position grew new to net total leverage that the of to Landsea We efforts a conservative ending first ended sales profile to approximately in cash XX.X%. maintain debt quarter great $XXX a to the the

opportunities of available that credit flexibility should million at to $XXX facility, strength given under us they believe rates is prudent additional sheet mortgage the an business position unsecured financial and unique a economy arise. the surrounding us foreseeable revolving We investment conservative to large. the the giving our the run maintaining future balance for a uncertainties from have and pursue future We of our

company new great to We momentum market can whole into and re-solvency ways home in into changing and by carry bring bright market. result, the Landsea in future first the to remainder first finding for buyers a back as the of a the and generated demonstrated ahead see industry conditions the quarter adjusting XXXX we Our a the as quarter Homes. believe

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

Mike Forsum

call. Thanks, to John the on morning good and everyone

many considerable overcoming market. felt were the our motivated issues our made the end We there first in the buyers year. of at last quarter operations homebuilding that in of Our headway by many industry confident facing

We some fire activity other as rate at we traffic base the the meant gained incentives market. of offering prices typically pricing given levers at some up of of to ease response proved of knew many of the us the market, progressed, a to in the pricing perception the new reflect rebounded few generate the cases, that over momentum there in last a over top In increase quarter and allowing In this reducing to communities confidence buying our virus environment form the communities. rates. pulled meant on to and These to also at higher more overcome discounting the this terms concern and months. was this, hesitancy with interest affordability. as write-downs accurately successful pricing instances, sales In both our associated in actions necessary

are year quick at move-in We buyers homes. to ahead of the more looking availability to higher ground Another who increased the spring have a the quick capture decision strategic for specs of on last factor helped end a close. sales our the percentage selling season of effort that made was of the

spec Interest coupled times have backlog build down rates higher having and from sold sale cut be we homes close. in rates the the first This higher proved rate to cancellation between levels with in build significantly process volatility, cancellation the quarter percentage more and the would the as time further that fourth experienced quarter the from on in case resulted felt we and dropped of along homes. a our long in we

as still stabilized, ease sales has to important have As on starts view our of our an part begun it the off spec efforts. market but we we

to the conditions, overall first With building cycle improvement saw respect in limited we times quarter. in

the that there front signs of However, process. were better, particularly end even starting get to in the construction things were

into we that we by process carry Little this seeing will this labor are little, phases the phases year. and availability material and improve are optimistic in later the build of all initial

levels We learned in more the these are we in our issues from supply doing make long have time's power will us chain everything and to homebuilder efficient believe run. cycle better, to the lessons pre-COVID return a

market great confidence incentives of Landsea home market re-establishing characterize the in by right drive Overall, buyer and the of sales finding did to pricing and rest the stable. of job new the levels the restore I and industry equilibrium a as would activity.

buyers pricing. a definitely and resolved attractive those respect to be I are time. has existing the The to times over issues has lack address market build am with still in new floor and more made to will confidence home but prospective helped of inventory also providing lingering There buyer confident home

much optimistic am I for more result, a As our about XXXX. prospects

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

Christopher Porter

morning, Mike everyone. Thanks, and good

Florida's increased offset quarter, for revenue quarter due year. Florida revenue, of of We the a million generated selling first the XX% Arizona. of year-over-year, homes homebuilding in in $XXX.X increasing in delivered saw For fewer million in compared incentives. million California, decrease last as to deliveries reported to XX% and XXXX of by a in Arizona we increase $XXX.X the quarter from California XX% we the saw while total and decreases first quarter average partially both $XX.X prices first

sales generated year. that revenue quarter lot In the other first in million of not this $XX.X occur XXXX, did we and

income quarter the for million. pretax was $X.X Our

to gross margin sales our sales balanced price really team year quarter, home our XXX volume, decrease XX.X%, above incentives closings plan a a the produce and of of ago. During profits from with hold a points and basis

downs strong sales incentives Our the new help consistency and with as order primarily customers John are affordability very momentum. in on the attracting pleased our while quarter. And in produced mentioned, rate focused with we our the quarter buy volume to

the from Arizona, order XX% first Florida. between were XXX% California million. fourth orders new and and last average XXXX order $XXX,XXX Orders were of value was of XXX strength with total of for selling year. $XXX.X balanced sequentially relatively up Net price a The quarter the quarter and down of an

We ended asset-light also XX,XXX year, option selling with quarter strategy. continue acquisitions a lots disciplined we assess as were ended up Throughout focus an have quarter average of current our the this of the as approach conditions the X% we on communities, lots these our land we under earlier. year from XX% remained market XX on and under with to control.

and policies experience. Florida. X The their to Title position Landsea on Landsea supply. began homebuyers' to years This further our X.X homes also issued lot in we closed represents of first April year, approximately enhance Title

We to will and the closing project, be Arizona move in from there Texas Anthem Landsea homes quickly will our Title start we at when then beginning.

by quality maximize title and title the Having efficiencies and ensure closing. of company service timing to us our process the home highest controlling allows of throughout the own and buying level

sales SG&A first XX.X% the or home million $XX.X was our revenue. In expense quarter, of

charges G&A right of a by $XX.X elevated our our work to expense operation size and and impacted was million little $X of improve onetime million Our approximately efficiency. as we severance

as We and structure evolves. will the overhead cost continue market adjust to monitor our

into tax first at expense sheet. anticipate represents the our of liquidity which tax rate We We historical an was through under commitment the end of March Our and million this $X.X in to progress XX%. strong to for back XX, XX%. balance range our reflecting as effective XX% ended $XXX in year million normalizing we just the rates with quarter

quarter on of we then repaid to the the our once cash and crisis the hand. $XXX.X to access this ending subsided, million banking the March, in height During liquidity crisis ensure fully revolver in the with amount drew

for consistent interest XXX deliveries of This the of Now, guidance range that with to at inflation the I around change, home provide and average XXX,XXX year. current delivery With some we anticipate relatively estimate to affect sales our said, would guidance to quarter the impact GAAP to overall and as market margin second range on may second continue is results. conditions $XXX,XXX. quarter our the based be rates selling like today to net be as full of anticipate in XX%. to in to and units home XXX gross prices remain We their

range full XXX,XXX that the prepared home year be with the the to delivery XXXX, and For range to homes new we remarks. of X,XXX homes X,XXX ASPs concludes deliveries of to anticipate And be in our $XXX,XXX. to that, in

like the we'd to additional now, up And open for call questions.

Operator

sir. will the will session. Ladies Instructions] begin question you, now Bouley come we from first question-and-answer and Barclays. Thank Your Matthew gentlemen, [Operator at

Matthew Bouley

the the strategy. about in now good that think ask like ground some balance I success from to demand so you to it that And to think heard spec top is the wanted strategy; maybe have that just and easing good. at spec reselling I there. during the was about you're spec cancellations had say there off still Presumably, It QX. on QX trying seems you I

you So bit? little why and positioning thinking to you're you're how spec back pull guys the going about a are mentioning

Mike Forsum

that at XX-XX where Thanks Forsum. saying starts. spec for starts, generally, going is question. will strategy around, I looking forward our Mike the would say, it's roughly we're respond Matt, I spec dirt by

to they with release, put release. to So want back and the have process or X feel want us. we buying be reason and probably is the who they're to traditional out The a doing seeing release pick or -- starts our we're showrooms. it X the a They building upward They want options at house go are that that sales other construction themselves. sort forward example, for spec market to it definitely coming for earlier in to want of then Matt, do starts to dirt we this X their in X, going we buyers or own that, if would we would

buyers move-in in more that there well, some the out quick As are as still like buyers acting marketplace. are resale

But monitor spec as continue So, that year to balance mixture that's forward. believe an this we are that to going appropriate we starts appropriate of And think we're and the of proper right as progresses. that going dirt approach. the now,

Matthew Bouley

it. Got

helpful. that's then And Okay. very

that, price QX the that for following you margin down to And you you are of The that on with margins just even of guess, guess sort say then we your incentives think just consistent spec of curious, that trending? I would jumping forward are one, kind [indiscernible] margins, dirt guided minuses, and to margins side. I versus and and be what flattish second spec in to as look you get pluses then to about kind question QX, on of I margin some outlook? think the how

Mike Forsum

buy-down start believe because it and will the looking that not I it. margins kind we are on our then of Yes, in with we as do the John let a me to currently that of I'll this incentive better include think -- they start are business, dirt at do mortgage tag the is

closer that the little bit start specifics being year close, is interest the down and rate the buyer those should go our going I that up? strategy generally actual think of has they help process with question is additional incentives to to to the margins? continue the we is, and said, and a hedging then move remainder think go John I buy And will through cycle our seek it as as of into more around this forward the the spec come houses

John Ho

results and currently, they for historically, do do been we'll We always of not it's probably a that Obviously, second Mike market, start may than margins. looking probably discounts year, -- a buyer see speaking spec options, That higher for in in particularly they're the Yes. a seek margin someone's always incentives. what in, will coming the the selecting We dirt us their this they in to. a by traditionally. half mortgage lot always or was that options start has to with -- like have improving

part buyer has of in Mike margins. higher this So that's And always having that balanced strategy a our approach start to. heart spoke why

in have quarter. we also We the as quarter turned year half and back this the to the going the in second particularly over see first of inventory,

In with on start through the starting for year, buyers this into side this we're of improvements this homes dirt see year second half also the to we're the second carrying half too, improvement we're cost flushing the going the and and into new as the second in that as year. half of deliveries well, some inventory the for

Operator

Your come next Reichardt question from Carl will BTIG. at

Carl Reichardt

well. Matt questions. doing You're wanted I margin asked one of my

or there your California, sort you markets going chest sense the pieces Or headquarters Let forward about nationally? now, about geographic a it to obviously, relocating where be in are there's investment California. in the to focus currently city? a of are more for of And me occupy? you the as X, me states more sort think years be you how sort give shrinks is that of new make is going it sense, ask on ones you X from Can of mix and outside do

John Ho

is a a higher to then to I'm pass going and at little bit I'm granular. John. Mike over this little to it start to level going talk Carl,

For This us, to year. a our milestone. year. important moving this We'll a is settle was company as bring very our Dallas XX actually years XXth

in a as coastal is into starting So, our the last diversified years company is now more we really company the company to the And Texas, of believe we've to where Arizona. throughout a of California Sunbelt. position out a as now moving then be positioned Dallas into too, reflection by Florida, moving couple builder then

obviously I be X appropriate portfolio equally a Arizona that pretty lot that's building and business now, and actually see move Texas growing a this in So think us is Texas Arizona, Florida. fairly we're and in between next Texas Right of believe in more having and We're Florida. has attributes. us probably our very, as X business for I exciting will that to California, California, because years, distributed balanced believe the very see a I our scale those business we interested we of pretty and

specific some turn over at things talk and to growing. to we're I'll other some it about markets Mike So, looking

Mike Forsum

Sure. and both by Thank Northern let that our businesses are begin we thrilled absolutely Southern California me Carl, California, you, California. saying with John. in

which long We the a that we flag we we Florida into well that planted as ultimately, have our their teams Texas. in said, we have franchise have that, is do That to years have is believe and these other a expansion to states very market big into will those said, have runways. tremendous is being entered that future, the as that there nurture fantastic continue come. John as though,

scratching just never at and in we're that huge about are we into opportunities the our growth surface we're and have expansion going But in that believe forward. to states. markets also participating we're going We those looking other growing now of business opportunities shy other

we've been that market been So are of the think ideas the having with terms have and their way they coming trauma their have who as probably valuations builders terms. I faced back conversations realistic really that this many nice last of more through made private in with to

And we markets but only or also so, we're find over be in, may in John not particularly synthetic hopeful grow years. to that not opportunities some the some help X, described we in the that areas next M&A that also can X

Carl Reichardt

on that particular element of up And strategy. following the

thinking that obviously, regional back might you the pay during crisis, how pulled homebuilding. talk about impact your bank So let's then the down line quarter, about and

private chat availability hear starting losing about capital do. So might first, they builders you're to and what

happening third, land do side? of self-develop. And year this lots development the also intend that you on what your is percentage Second, to

I'd just but like of I think it's there, not a too. more than them number

John Ho

want think definitely that's to think more Their seeing don't their have are them to this. and any stab run going manage first And inability to that's definitely in stress spec starts. capacity it. a than hindered. market happened in ability their more But they of relationships a be others has mean, terms any the private in a as of past different banking that way. Chris, I we take I institutional to do their businesses know backstop what financed in I'll are you and to are builder the I at in if Sure. now I

looking said, they at sought can gone frankly. to year, last buying of So out in have way really been seeking them that and dormant being we we a of ways most see which that them or had are assist

-- don't excited optimistic that ago, nice to acquisitions I that very that some to pretty going doesn't few we're a say So be in it but what and make some want very jump we we're whereby we we're doing. seeing are because to sound opportunities we're can saw years strategic

On land the lot a haven't of side, capitulation. seen we

I of the the generally and those developers land are coming survived country savvy pretty out think GFC, patient. around solvent, that

for Chris? haven't not is because any anecdotally, I or So In as getting if lots reduction us all that seen that we've available. but to more them their seen get well, of some of mean, mostly we generally, if all finished pay an big if kind communities us, have premium being that's really do yes, what kind that able but well. a that cases, that beneficial can by do alignment coming are land price to we you in through there's you probably they the terms the some but up proposition yet. there's in lots lots, get really we opposed I stress have of maybe to on well to and more beneficial of do

Christopher Porter

land of, capital tighter availability in about loans on to side, your Carl, a there is question definitely it, the availability and land market call ADC development. for land of terms answer

California. majority as have also controlled. I Arizona majority too. in we've a self-developing are We terms lots us, lots. lots that been a probably -- in Texas. of And do successfully would to For We've very come done of say in and do in obviously of finished us our that our We in good well

lots to have us that. finished. majority We opportunities strategy, are tend finished current lots. do our XX% to more XX% are for there of about with But owned, we're So our of our

Carl Reichardt

that. incentives. prices pricing quarter, during in? I a question can Okay. one first you ask I on that have have might incentives just And raised of percentage appreciate in your base prices more Do communities raised not you what sense removed base and of

John Ho

Roughly communities. around XX% XX% to of our

some at most stabilized pricing incremental in traffic incentives price Most which increasing We or But and for has have increases been reduction able and driving have forward. sales the been our going incentives to current business is volume. of ceased. any pricing through get part,

Operator

from Rygie B. Financial. Your Riley next at Alex will question come

Alex Rygiel

quick couple Gentlemen, here. questions very nice A quarter. of

First, on like the looked any rate update April? in what cancellation

Christopher Porter

Yes, Alex, this is Chris Porter.

down again We rate improvement into see cancellation continue to got digits for April. single and in back the

Alex Rygiel

what California you're seemed thought. around Any than Fantastic. And so on? would then a I product stronger bit launching have that, commentary

Mike Forsum

Mike. we're believe spot Alex, touching Yes, into and in is positioning demand. earlier, price Jarque California County, Northern our California the I with particularly really out about this a our performance, sweet of that points coming I in said happy as San terms New Empire really is in Year. Inland the our

they seeing we buyers coming that are back retreated think absorb deteriorated to we're that it's are whole are whole to a going pricing as to those in get out a isn't coming demand aren't then more are realizing what and and to a and going drop more senate lot rates position the that today. now to nice market lot again, I that

particularly So as have Southern California quarter. Northern yes, well, this California, been outstanding

Operator

are no [Operator further Instructions] questions. There

to remarks. any back for I Ho John turn conference So the will closing

John Ho

Thank look for quarter you, in earnings quarter. with again We the you our joining speaking everyone, us call. to for first forward

Operator

your Ladies call lines. morning. would all ask please your like for and and you participating conclude We you conference does this for disconnect to to thank gentlemen, this

Landsea Homes (LSEA) 3 May 232023 Q1 Earnings call transcript