LSEA - Earnings call 3 2023 | Landsea Homes Corporation

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Operator

Good day, and welcome to the Landsea Homes Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.I would like now to turn the conference over to Mr. Drew Mackintosh. Please go ahead.

Drew Mackintosh

Good morning, and welcome to Landsea Homes Third Quarter of 2023 Earnings Call.Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the federal securities laws. forward-looking which subject change that risks numerous cautions uncertainties, and over Homes statements to are assumptions, Landsea time. Landsea risk These are risks Exchange described Commission. the Securities not but its by factors limited to, with and the factors and uncertainties the Homes in include, filings -- our our forward-looking to you Accordingly, place should should representing undue relied statements any whether of securities. reliance upon be statements as in subsequent these in not invest deciding forward-looking as on not views date, and the under not may after were do can non-GAAP laws.Additionally, of or as forward-looking measures or obligation statements measures to update Homes's We most events result be applicable undertake accessed of to through the otherwise, to and reconciliations filings. any reflect comparable a securities SEC be in except its new future events Landsea made, circumstances GAAP discussed information, required financial website they as date call on this whether Executive Ho, turn the Porter, Hosting Chief to that, like the to Chris call I'd President Chief Financial and John today Officer.With Landsea's call Chief Officer; Officer; Forsum, are Operating John. and over Mike

John Ho

share. revenue margin an income $X.XX home the quarter home diluted share came the Good quarter we third go sales new developments for today net Landsea XX.X% in generated morning, of company. for Homes in price Home as at and the million sales thank our the results XXXX, discuss was and average at $XXX us of or sales over of in remainder million for some exciting you joining our to XXX per of and outlook third on year new for $X.X $XXX,XXX. deliveries gross our

movement for are in our community softness quarter results buyers throughout some in sales quarter market quarter, We the interest pace a and engaged upward selling per at We new financial orders rates came saw strong as company's X.X the believe these of so home per communities are execution.Net at in our the on reflective resulted homes new pleased XXX of they and our month. resilient the with active and progressed.

disposal of several Fortunately, higher sense buying tools we offset their confidence a rates at the of in gave and that consumers home. had impact sales our

has unique of to jobs demand price environment. points, from competition for outlook home and U.S. continue set communities.From our remains the housing believe to fundamental high-performance despite our like interest addition, long-term existing remains consumer traffic willingness a construction life-changing macro inventory home In and for ability to move homes apart purchase to and perspective, continues strong. at shown home buying while continues decisions a the the positive. us lack rate drive a be There to high all the a the with add we new The economy forward

on in better price fundamental economies also in inventory. have the stability particularly of have home scale. seen the path plan operations. and scale existing to the seventh We to the Colorado-based this size of on of previous home quickly in to one close and thanks strong and this access housing our in Richfield the enters so our achieve our acquisitions, Homes. of continued All factors homebuilders, the of Landsea Similar presence acquisition, [indiscernible] presence established balance we continue local the of capital.Against we acquisition Landsea to quarter, we country. of an local that its its markets, large will scarcity sheet with of backdrop, market assets announced With best with growing markets market strong homebuilding those has After benefit our part broad-based the these growing

they've yield on Colorado and company our the months the already and we in within this continue We land-light believe immediately have our to that efforts accretive strategy to We new be and targets market been segments veteran today's playbook we'll high-performance affordable look division of the than to focus these XX turn recipe the other XX-plus same the on fit a for Lisa expect and to President, for in inventory which return a right lead market, employ model. and earnings follow and our industry expect including of achieved a quickly. markets, this deal in in executing Wiebelhaus, capital the success success to a team, differentiated market.We acquisition Richfield's with for is more have retained series, build is seasoned the IRR closing. leadership on home that percent more Operationally, we

the stock rise that forward a position believe company will authorization, shares end, in the our business XXXX. To and its With a which with stock. we believe acquisition out buying we is a Board important finish is months. our to our standpoint, common.From next confidence the continued we grow plan million year that balance to the become current opportunities our deploy momentum this throughout it that repurchase program.Landsea at in a discount our strong carry in earnings interest a share repurchase friendly capital and share boosting at into $XX on is our book undervalued via share our price. rates, feel great to XX that has value, per investments to to note over We to signal in our allocation approved actions We look more the shareholder

largest caters product established in presence to profile have in and the We and an of the markets some best growing the buyer segment. that country a

great leadership and in experience interest high to knowledge and a team is industry our Our rate balance compete necessary senior environment. the effectively shape, has sheet in

like the excited we color positives, on provide remain quarter. operational these will Given some Mike, the performance to who over future Homes.Now our I'd Landsea about call of to turn this additional

Michael Forsum

pace activity soft strongest employment the in a our rise new divisions, year-over-year while Southern community Order continued Arizona improvement the Thanks, our Northern and lag issues in and to in Net up X% trends an due to California absorption John. in and were to in thanks California division was average quarter, sector. affordability XX% tech orders XX% third count.

existing near continue offer moving end expected overreact each competitive individually price financing note sustain by to rates. incentives of meet levels, created the to the John able are of market. in motivated quarter. buyers. with that to the and to seasonality was communities are of a an bit that our affordability solid shoppers is appropriate to adjust with to at us demand for competitive important the off in conversion in and for as traffic of solid tapered a to which of the base time our monitor seeing allows during Most homebuilders driver us to from saw maintain the year.While allowed who home solve it consistent we throughout this ability lead payment well.As the being big the trying normal to bigger in as our clearance was was stayed to key majority of market, from needs year-end the resulted committed be a to payment is is Currently, associated mentioned, quality advantage order we communities absorption the we pricing a through generally market meeting our players practices. It home came not quarter communities of Our rate and in monthly stability our market as to but the versus increase It higher adjusting our rates traffic the short-term buyers we some activity of shifts incentive remain quarter

lot and result, activity incentive we being rather one-size-fits-all with a As are strategic community taking broad specific strategy. a by than being brush our

either a in Fortunately, cycle clear quarter significant the are for balanced feel we as we and basis. really when targeted approaching despite the ending into better leading of quick remainder business in about a the business the comes forward. home allows our environment. sales backlog will times model going end thanks It for also and a Buyers which typically path improvement saw to Cycle building on return levels, hitting for to customization it a be which to to from profile now year, spec our a conditions or the and solid reduction who head year pre-pandemic have our a company.Overall, to year-over-year delivery sequential good return versus homes approach.We choose a third a allows quarter, us to-be-built. tailwind to-be-built, can visit communities rate move-in time we our margins further for of in goals our the our mortgage more more high

for our and buyers have are inflation we the existing motivated material while see division our at have appears Colorado. markets, about seen in to remained remains in and are be lows. we fundamentals waning continue lie all-time in supply opportunities labor that best ahead home the existing availability to excited markets positive our in Housing and years. Cost new We

As we the for the financial our on a would bright.With this who turn and company to believe for give outlook an remains over detail year. that, call on our to provide like the update results will I the more result, Chris, quarter remainder guidance of

Christopher Porter

Thank good everyone. you, morning, Mike, and

we pleased mentioned, and Mike way with As the a we're strong quarter, executed. John entire had organization and the

of million we quarter, X decrease XXXX, a for to a $XXX of revenue, third homebuilding million third taking us year. the the first generated $XXX For of over months quarter in XX% total the

and other a delivered revenue also million. million $XXX We sales total for in lot of $XX revenue

of team up quarter, third our X% quarter from $XXX,XXX.Our quarter, average were homes sales from the an price delivered X.X% but This down of sequentially ASPs XXX second the year. last with

ASPs deliveries quarter the Excluding last year. had year, of and last were which from our New York up Texas, X.X% third

the Our driven from production and from XX% California, from balance XX% Florida. was Arizona

consistency it margin fourth a Colorado which will on will sales quarter adjusted to XX.X% interest grow well seeing as quarter, the small cost excludes and of will was $X.X quarter, contribution reflecting continue in in we new in as a was and to million. produced as homes order and Net to $XXX,XXX million XX% be of XXXX.Home We per of in booked total an from X.X Orders quarter gross and million our year average selling million price community a start compared were quarter value were although orders versus new it compared a homes up last last basis, accounting. have XX home we the fully last improving accounting focus purchase was third and quarter. start, for SG&A year. slightly from X.X rate anticipate that price the pleased the John remaining very relatively our ago, income costs, over the was million lower the constant XX% with declined in from next XX.X% the coupled with and On revenue $XX of XXX We G&A we quarter off our quarter $XXX to dollar our $XX.X absorption year. in this price on percentage revenues as mentioned, overall a burning for approximately order fixed volume of for months.Pretax year.As efficiency. purchase are with the the sales $XX.X second basis, the

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

ended $XXX quarter the million Our with turning represents $XXX credit which tax tax which cash third equivalents XX%.Now revolving expense rate $X to facility. We of in and was liquidity, available cash an million, $XXX of our was effective and in balance our million third million quarter was sheet. under the

book repurchased XX.X% value for million ended ago. year we a shares of sequentially quarter, our at second increase per X.X X% tangible $XX.X and million up the from $XX.XX, During share quarter an from and

of the debt X,XXX Additionally, remained net total and year, XX% still $XXX,XXX X,XXX units in ASPs with total be XX% and the delivery be to in of capital.For in ending anticipate line the stated leverage to capital our to policies, range we to full the has debt new range our home $XXX,XXX. to to ratio at quarter deliveries

conditions, GAAP anticipate and to the questions. we'd for to And prepared market This year sales we be the based is continue rates in change, margin as up results inflation, call our best range. now Additionally, our the could estimate current and guidance that, accordingly.With of conclude to full overall incentives on as we home like today gross remarks. for XX% with interest open change

Operator

[Operator with Instructions] comes question with BTIG. first The Carl Reichardt

Carl Reichardt

Good morning, you everybody. the for information. Thanks. Thank all

other So builders. if about I ask wanted Colorado, to just the has in to market first acquisition listen been you there tough

to time get is So that could a in. one this argue great

the On hand, for other it could a while. tough be

a other talk or discuss some standpoint. that the looking strategic And markets thinking So can maybe acquisition about also at of you from from a you're decision about perspective? forward

John Ho

Carl, also strategically, that this Mike is up. about have John. follow I'll then and talk I'll

for us, of it tightening that these these we think in a lot have interest I high about credit as conditions, that access, to thought and past, smaller and less pinching we've environments less builders resources private capital. the certainly, talked access probably

we for able So as [Technical acquire and us really came that assets really it thought was is primarily was inherit qualified, opportunistic to the then this across and well the team we well Difficulty]. opportunity

a for us, that reasons us, it's the we by all a market, and So so Denver supported we market it was long-term the great think an runway and a opportunist acquisition demographics think why is is forth. for

Michael Forsum

Carl, it's Mike.

entry, higher leverage or point. since the It through either it. well, market a experiences very market this was I've we bit We that requires would land where and We for career the your a Starwood, market we say to low-cost to was and believe those which honed been not which John. in. does be various skill through everywhere or markets all XXXXs, land And in have the in. set market. reasons. we're strong land barrier into question, I liked stronger to be thought private it fashion [indiscernible] does another land know entry at looking great little through then my primarily my then do it We that markets And around with really us through always one know opportunistic.And the a on a time. give entitlement, to But got development, incredibly familiarity an California. Just in that own to I follow-up I've around have I that homebuilding Colorado We've the banking. homebuilding equity then

the that a builder of our XX that's course over and for through growing years existence of think I choice then of private looking exit. to we've become acquisitions, smaller

as before mark think early excited not whole We inbound a we real those got that on can in directly. others we Texas, their got mean that have our cadre the got that that about and about folks looking positions, we talked looking this. about well excited We as excited platform. consistently Florida. we're make But in there. doesn't markets there We out a about of we have come in behalf And that

to folks, we're having business can and path great we really to through bolt-on continue growth want. that that fact, currently down we hope to we with In conversations the this continue go our of get growing M&A

Carl Reichardt

talk have what detail I into like the get here, cause range? would next wide that deliveries, higher of the 'XX the conversely appreciate the top Can end it's Chris, of would to help you lower toggle bottom points we versus the then over are -- or of course end end weeks? your the What a the you on guidance fairly that end to that X for for those. about that you range. still the hit conditions And

Christopher Porter

sure. Good Carl, question. Yes,

think right rallying to Fed to costs around buydowns incentives I uncertainty and rate even. now the XX-years there's stability that. the that steady some lot lot I volatility and mortgage bets think of just the is revolving in the of And the today hold market, going is related a of that a

within upper be or us steadiness just to a incentives kept the end that where some on for aspect give And range wider think confidence We little as so mix the on may more well bit the I year. not as going may based there. is of

Carl Reichardt

queue. in back get I'll

Operator

question McCanless Wedbush. with Jay Next comes with

James McCanless

bit think 'XX. ahead to to a little trying Just

talk year growth could think on. community we Maybe with you the Colorado acquisition. things be that should different the in to for next You've about going into going you is Austin count what looking rough numbers, coming got online. all have just

John Ho

Jay, to that about with it this community over maybe John. is to and hand start I'll Chris then count. talk

quarter. And our which deliveries Homes, selling in Colorado communities right then have we'll some communities actively opening We are new the this X of those Austin. acquisition of fourth seeing excited start with in they of about now, Richfield

I of the of market, around we I probably say, about uncertainty to lot would to As rates, relates the think incentives we have it XXXX, the as share a amount offer there. to thoughts it relates interest same,

given haven't we on guidance any So XXXX.

that growth, to relates it unchanged. mean community As I I remains think

Christopher Porter

that Jay, acquisition, -- agree, think you that we would Colorado it. to we've Austin, the grow those on We with we'll I Yes, then And would there start X continue there's then out today, communities see we're X them said communities and our can website. expand communities.

XXXX range. with in we that I community in up to consistent count where be XX% growth XX% see So thought would to relatively

James McCanless

Okay. wanted the talked best I you materials availability already flow, talk And perspective, and from comments ever gives to the declining good, a this what in where you. dive more comment. that years out little we encouraging that's builders? incentive gives about to options about things just labor what I cycle a pretty X more this does Mike, could better are That's lot given think that time a I bit maybe ago. from your there's if find you was -- but other great. to industry And I cash maybe then, product seen, is draw availability, how you've guess go this -- you give

down dig on So maybe please. little if that you a bit, could

Michael Forsum

that pre-pandemic the business Sure, materials clarification levels. and say, of that the our our of Jay. getting probably We're execution normalization labor are back I best point to and flow. I would the as believe since a and

costs encouraging So reigning as in. seem well to super be themselves as that's

spec better and it in is does, to it are want What a them It allows our towards a sense little from a deposits the We by starts. it. they're with and on down secured starts and that vests to dirt starts do cycle dirt more that collect a that with the again, kind a industry starts. though, taking.So of our And of dirt it's more you're us that really and the to for deposits distance the side, way we where relationship believe get customer, their closing on organically the shrink they in level more because house customize fact more And happening transaction have allows always This standpoint, outcome. bit the is down. moves we're close. between dirt doing that that with model of to house strategy, we they moving can the towards times, of little generally, gap us, the of our us the by deeper was options things. final build create put it's trajectory times higher So business sale with type and more our virtue cycle to that more the bit them happy

more seeing seeing right we're so I or looking to the a we're quick now And versus a acquisition dirt that coming market, buyers say. close, roughly spec to where acquisition do should move-in

our healthy it's -- good and like that we that's it's us. standpoint, that's a just think and think we thing building a happening, So we normalization, the business from stronger for

James McCanless

great. full right and about and now? pricing you gross as we mortgage cost of need you XX% relates buydowns else is push to Chris, all's that approximately the those? said ability for And I something year to to talk it the then, I margin. about, That's price there think rate guess, talk could is of we Or power if XX%, most

Christopher Porter

primarily it's push demand in mentioning just the mortgage earlier to that that to think I that through. to I incentives continue incentives related No, general and was

deliver base at didn't up business exclude you look if of New year-over-year, and you our If this ASPs X%, kind in quarter. York which Texas, were

But shows just a I it that some lot margin-wise, so seeing. around is And of we're that that within portfolio. think based incentives the pricing the I think

James McCanless

me. Okay. Got back for it it. I'll in That's get queue.

Operator

Alex The Rygiel with next B. question Riley. comes with

Alexander Rygiel

helping nice lower Could your Very you about you're mortgages? talk find quarter. a how bit buyers

John Ho

Yes. want Chris, do you to?

Christopher Porter

to a with Landsea mortgage. under know, as brand Alex, NFM mortgage partnership got Yes, sure. Yes, you we've

mortgage creating have So them work they we Mortgage to and incentives And on programs the just also doing mortgage NFM have tagline and through by there. our buyers. of the Lansing powered with all access we

buydowns. out all we're incentive or variable everybody So then haven't it's the towards we'll And rate the do fixed what we're costs an But mortgage. still XX-year. that bulk is primarily, primarily the closing use movement of either around on it's as XX-year there. the and able a We that lot and seen XX-year buy to, towards as seeing in a

And company. so doing that's primarily we're is using our what mortgage

Alexander Rygiel

if base to about relative then September. And quick opportunities any can in then a the update and sort bit prices to us on trends you give you're of October talk a seeing raise

Michael Forsum

Alex, this that on Mike. Sure. jump one. is I'll

it We are that cases, actually, think where when and prices can. not we prudently in some raising I thoughtfully, but doing we're aggressively,

right So Florida to community feel right in payment doing now, what they markets further is Southern point that's monthly and that, of backlog as well at a to in strongest We're our in places opposed think That we're seeing one, really it's we're do and able note, really be a price. well. Arizona business they're that.In a our to that in absolute locking that seems as now, we're California. as because I like at Alex,

sure to absolute be they rates that making payment to against around is the the about seem backdrop to does up of afford with. and so the again monthly resistance payment down the hesitation qualify.There a have monthly And more credit can real keep It's in comfortable ability not mortgage talking know pricing coming they interest or that comfortable out really that what our profile there to from just terms affordable through. that they're or homeowners' of the ability Chris a that such was that's are be toggling they buy buyer the absorptions

Operator

BTIG. Carl from Reichardt comes question Next with

Carl Reichardt

month, changing per should overall? you X the month might I at X I trying rate bit, going X. over higher end, you be because of to the like company a do know you'd a time, So the just that have week, think targeting mix say, ask a is of entry sort be be sort quite and more mix a And to that it's normalized level, as your target, moves here absorption around

pace get think So be head, it's roughly trying the constituted? in normalized a as your I'm to of, sense currently would absorption just a company what for you

Michael Forsum

I net X.X time is the too over per to be be in think pricing we ideal. of the community I my or too think you high, that's where natural should absorption -- the and absorption that to of aspire, business, in you're that that generally, course that organic seems rate not Carl, where And X that to not pricing low sort be.

Although there's seasonality that comes into play.

I So be through and you'll you start great as market. the a if if energy X to community at bit into momentum moving from really into and sort a of and the you're average, the of maybe little of you some it job going you've to healthy everything a summer you're of got the look you've summer, course kind may end, get you of really may you're have on way. community. dipping that higher Xs naturally optimized if then as the But spiking beginning down you greater you to done kind through through the X.X think take And lulls along even some a hitting that

Carl Reichardt

dropped. peers that lot sold builders, Okay. couple to a deals have of deals talked so been who have you developers who had finished about Perfect. then smaller had And small

availability. And to so these great lots, up chance least a go have there's finished prices, and at pick not publics had but at

up land builder this not opportunities happening do than see overall more acquisition are some larger private with all. there's of the you obviously, you they is not and peers or that's Colorado, see because in of cost as market, -- Where see say happening positive distress at that you element. do had really capital? it? some higher had But Or showing You guys where

Michael Forsum

of infill Yes. our seeing where That's smaller price some and build-to-rent type builders that are who has Carl, single-family of into right sake. actually Florida some to that business ready at are specifically, talking they're really or have because question, points finished opportunity are in our between because with and to because backfilling we probably bite-sized gappers of they're efficiency what way that just locations Arizona those we're holes for wheelhouse, rent, wouldn't get are really a filling come be we're properties, financing communities in our We go, markets, lots, our some month-to-month. looking acquired like and they're in that great we there can't is in quarter-to-quarter

getting we have locations. in at and a and So of to talked those handful close looking actually those

So really that's right we're seeing now. what

I think really that ] get private, of that project. all is out the find to them most builder the [ to stress build-to-rent financing that struggling through way sort is there on

Carl Reichardt

All That appreciate makes a sense. I lot of right. Mike. that,

Michael Forsum

Sure.

Operator

This session. Instructions] John [Operator turn go concludes our like question-and-answer closing over to the back to Please conference ahead. any remarks. I would for Ho

John Ho

us joining everyone, look for and speaking you, the Thank today, to we again. after forward to you fourth quarter

Operator

for you attending This meeting. presentation. Thank concludes today's today's

now disconnect. may You

Landsea Homes (LSEA) 2 Nov 232023 Q3 Earnings call transcript