LSEA - Earnings call transcript Q1 2024 | Landsea Homes Corporation

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Operator

Greetings, and welcome to the Landsea Homes Corporation First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Mackintosh. Please go ahead.

Drew Mackintosh

Good morning, and welcome to Landsea First Quarter of 2024 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, range 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

any not undertake obligation do forward-looking to We statements. update

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

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

John Ho

XX% for we strong X% Homes conditions market of for our thank orders today the the us the for results community remainder and on go closings Landsea year-over-year we growth Order our also XXX in provide quarter as morning, of delivered during in sales rise a the increase to per sales activity average discuss solid as first a of thanks outlook top an a XX% line home update quarter and Good generated in you of X.X XXXX, over and was first homes at pace quarter, the current joining bus. prices. year.

home to and resilient product growth remains our see environment to on in strong line. to look markets continue strong demand of We low capitalize thanks levels a macro our through new interest favorable, The our home existing and well-located job in inventory. this for high-performance desirable communities economy, our homes

and in similar and continue economies targeting high-growth like backdrop, achieve rapidly successful Arizona scale Colorado. This Florida, proven the strategy success to of at places look in strategy we to pursue a we level. local achieving and and this has of Against markets Texas

Antares area. of boost us XX with Homes, lots Worth a communities with acquisition the X,XXX Our and April X goals big got Dallas-Fort over which Texas expansion provided the in

about only home shares from a acquisition We Homes our talent to local new from well team it when from this expect affordability it proceeding smoothly, relates Antares to The month. vision extremely fully values perspective, as is this and The as home platform comes customer a end our and the operationally excited construction and to brings standpoint. our as by are our of what operations market land loss also board have integration on we expertise to but and product organization, on and Antares quality service. not

In quarter, addition progress to executed made added also the our balance we transactions to X operational capital the that markets during more stability we sheet.

X.X another transaction institutional more Landsea approximately longer a million ownership placed controlled considered company The successfully meaning to XX% Corporation largest Holdings Landsea investors. shares shareholder, [ Holdings traditional listing with standards. from Homes Astec we ] First, our Landsea brought no under is

all an of achieve and While from investor we it is of to and diverse best the designation a we our in shareholder, believe important stable our always independently largest felt was this to interest operated stakeholders accrue have base.

the achievement pay was down rate it provide credit our transaction to interest This portion revolving of senior outstanding an us pursue facility X initiatives. second XXXX in as under The fixed and a capital was growth placement us to million notes and allowed borrowings of $XXX our longer-term due our significant X/Xths. our with in a rate for of company

deal felt rates since interest in fortunate place increase did. to the recent the closed, when notes have these Given we we

from net homebuilding in from operations to to is levels business. remainder invest bring to our generate our down leverage of enough continuing goals for current the One our of while cash XXXX

will to ended going outstanding shareholders. last Texas over in made capital dynamic Higher result will significant us direct as repurchase to of have to operations, debt first shifting work-in-process operate in of in fewer ] XX tied the in give a shares with particularly lowers [ business, last we're This the forward to the year, first quarter reinvest the that efforts well return homes. a we allow will on cycle us door position the inventory. or optionality improvement bring up beginning our the from several return cash and a either well down the investments in XX% and Over capital close those investments months. times, which our as and quarter to share more quarters, strength compared Colorado, pay upfront see We cash the balance in as last

pent-up quarter, We continues to accomplished own beyond. were demand and great lot for financial of inventory a lack an market we a are from achieve and the existing benefit a motivated our both to buyers feel to first standpoint goals and position The home home home. from and in operational a new from XXXX in

footprint We in have positioning of these product to in advantage favorable company our made take our terms positioning. of and geographic both our trends, progress great

on As achieved of established already markets. in Landsea company and success a I result, our believe as our a builder each Homes the can build top we've

this Mike, performance I'd our on call more will Now operational turn provide who to to like quarter. the over color

Michael Forsum

did and stated total closing first everyone. in quarter delivery the John, higher solid our XXXX was Landsea deliveries a job our than with and culminating excellent morning Arizona of the homes, led turned teams XXX homes, to as in in which selling performance an guidance. by XXX Thanks, good way of California. a Florida and followed

in delivery to Worth forward the market. with moving start should Antares particularly we from the Texas contributions of addition mentioned, Dallas-Fort see and Colorado higher John As

of with starting homes new are open gain momentum as an now in also communities of phases and Our several in to construction operations under model number Austin earnest complex. are selling a

proposition platform our to across our buyers orders quarter, of to resulting sales spur the to continue continue was mortgage provide. selling basis activity homebuilding homes as high-performance that the XXX and the each has important a Demand be were on they our mirrored in of XX% to to a Net the value tool communities new incentives our use sales. favor rates. year-over-year Financing we've up movements and for total in in home the levels broad-based an markets needed

lack new to homes XX home has spec as to typically as the to We remain existing incentives longer. higher which quick days. rates stay close void by home continues is sales The to buyers, of supply sale, market long created and within for the these elevated continue attract of want homes elevated for buyers expect availability an homes. a why The on of we operate filled with move-in

homes to time personalization buyer. for start upgrades is the while leaving goal and Our lead enough to allow the from

buyer not also mindful in are reach We of adjust our a being too given we'll pace completion and community starts accordingly. of without many a the homes letting

markets, We of prices alleviated past, times in in This are seeing availability inventory better to of has rise. some has improved in and better our cycle experienced the continue the which land we've labor resulted pressures each the and material turns. cost

to land, of function risk which but this but a reduced comes a a of cost. and is develop banking capital is upfront result Some of the also required own land tight of market a at arrangements, land

have would of and look continue benefits interest up spring, a the the the we and a in to tie spring Traffic to is ways the Overall, incentives characterize for land-light interest been in buyers of changes selling level will dictated believe had capital-efficient lots have consistent throughout we the general, while we strategy to I from season rates have offer. solid. In outweigh cost, manner. the

with in quarter XX% first cancellation in at that rate purchase their aside their year last came move for forward the who decision. Our to confident XX% remain compared buyers

and operations Worth well, Antara from market addition we year Florida Austin and we Our are on the Dallas-Fort Colorado. entered and financially, our believe great I both beyond. in shape, second to are continued to California, about quarter the and growing goals excited existing the and in We Arizona in track meet and and the for of this perform contributions operationally

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

Christopher Porter

Thank you, Mike.

higher exceeded quarter high and a As revenue XXXX $XXX.X of first increase home million. than were price year. XX% XXX and XX% the a our of our guidance sales Mike our reflected produced over to last average in XXX,XXX increase Both mentioned, X% selling end deliveries

end and were quarter of margin at as came gross XX.X% the to X% revenue. in low guidance incentives of of and the Our approximately in discounts weigh continued

the rates for for to longer, levels would relatively With remain these expect outlook stay we to of higher time. some for constant incentives

of stronger year. We in XX.X%. came adjusted income This net share. or or reported $X.X in gross of the million compares Fully first $X.XX share $XXX,XXX $X.XX quarter per to net per at income in last a margin

of to accounting purchase of transaction acquisitions. we quarter, along $X.X This previous million with million costs Antares related acquisition, had $X.X from primarily a price

communities, $X.XX Excluding per $X.X costs, year. net quarter X% the with income our average of was or share. ended last We the selling from up quarter first transaction onetime million XX

During the and XX quarter, communities. opened closed we X communities

we communities with as John Antares noted, As XX in April approximately X,XXX of added X. the lots acquisition,

ASP for of XXX Backlog homes $XXX,XXX. quarter a with value and million the total of ended $XXX an

home quarter expenses SG&A XX.X% XXX of XXXX. the Our of at basis came revenue in sales better first than points this quarter,

this cost, million $X.X would to the ratio Excluding improved have transaction XX.X%.

staff leverage we'll not and in overhead the for improve to SG&A or will corporate see starting the add acquisition, our quarter. We any begin Antares second

benefits our for $XX,XXX performance the improved Our of the and the the vesting tax of primarily stock from quarter. option tax benefit was quarter in additional site result

revolver. turning our equivalents under $XXX million our cash quarter Now balance in $XXX to in and liquidity million and million and ended $XXX the in sheet. with cash availability We

revolving quarter purchase cash Our capital. The for closed debt X, XX% leverage we is pricing to X-year capital gave the to April ratios hand million reliance Antares revolver our and and note, revolver. to on equivalent at our facility. to total our remained expectations, current on fixed debt which effectively $XXX our in longer-term $XXX.X and and on issuance utilized our million credit homes ending capacity On approximately XX% us with and line our rate capital of reduces the total net rate

that refinance by group lower to the Subsequent the X We million, into for new U.S. by we our this XXXX. and of capacity banks completed reflecting paid of adding $XX to our quarter. revolver, reliance led the syndicate of bank $XXX transactions, term Bank and and the America during a these down the extended total Bank million to facility broadened reduced

increase need to we to feature accordion capacity. up an have $XXX to the should million continue We

Additionally, basis improvement grid an in will we a and to pricing initially rate. approximately realize updated our pricing point XX

temporarily consistent to be Net-net, leverage indicating, have for targeted our our debt what increase and should within XX% of cap been acquisition year. X levels the we in will with back

year, full forward $XXX,XXX between XX% X,XXX and average price are to we $XXX,XXX our XXX XXX of and XX%. home new to selling GAAP units. And in for Now to the our the margins new the an to between deliveries anticipate second X,XXX with home range we of be deliveries quarter, looking gross confirming guidance previous at of

We the expect $XXX,XXX. to ASPs $XXX,XXX in range of to these deliveries of be

for price anticipate accounting the GAAP are be XX% range. we full to home acquisition. sales our dependent gross in upon purchase margin the in These assumptions year the Additionally, gross ranges margin XX% with Antares to

We remarks. the inflation, current market the the on And quarter. will this for concludes could know That we'd rates overall change, based until final interest of accordingly. to our like our later estimates conditions is the change up as prepared second and in with allocations questions. guidance incentives call as continue not now to results Also, open today

Operator

Matthew first with comes Your Bouley from question Instructions] Barclays. [Operator

Matthew Bouley

spots your that topic, just out you've the Congratulations going at focus geographic now near should or on is to Texas you investment really and on we stage in want you're of the kind that fill sort obviously, footprint? exposure any like at of that where you building the feel of the be to the kind acquisition. some completing medium now look there time out more room broadened the in markets term for organic least here, is being, in the that that still footprint the On to in

John Ho

Homes the This is John Ho. Antares closing of the pleased acquisition. with We're really

pace area for DFW of here headquarters and last believe the Texas know, year. a you our significant growth to and future We company. for us of Texas in particular, we that is moved the the As Dallas,

I the availability ago the think family on the Very in. a it's how market at use Antares price. and completed have the essentially we revolver. we similar a over years of We to really combination acquired roughly penetrated and good [indiscernible] same cash pleased the market builders, X the hand be when to of time to high-yield same as offering We're Homes. closing Florida under

be debt. And debt, really of to that after able usually We be. quality flow that's where XX to puts the we'll drive from So from us really generation that and can good cash within in that a reduce place acquisition. acquisition months, be of the the stability our able really leverage

any at the we very You business as and integrate -- do growth we and M&A areas, should in done we've Mike it. for -- in cash is near-term in past, markets. to We potential debt. them move and grow as then we expect have our acquisitions of I reduce this the our quickly generate really good think, also each of respective have in terms growth organically can in, I time, businesses At same us. our significant chime

Michael Forsum

than and Not we than digest, and Yes. buy to our it's what consistent John add with buy where other much Matt, acquisition said, digest. more strategy

necessarily so it's parabolic. growth, And it's to stair-step a not approach

pretty this consistent. is So

consistent markets in terms do that. we'll are As in we're though remain our do strategy, of to and always which in future at targeting hoop the this, that we we with and growth continue looking do around

I find position a when to business, basis. it's will to that relatively add on a in do these again accretive you're our position puts quick that to so growth you opportunities help time in think a

years and did to instance, we've for brought almost X acquisition. to For bow been a was it before the company over Antares the we that talking

the I take at strategy the the synthetic continuation States. growth, homebuilders said, performing just John And these we along a look So that want be, growth accretive and one in and United as to as things consistent growth effective time. a organic most is us, for which place said, it's a with of, towards highest, of multipronged

Matthew Bouley

Secondly, kind gave the given of near incentives necessity a you of great the into move just rates. lot a color, keeping in the top term, around maybe zooming sort of of elevated latest

well X a looking the for your And incentives of color point recent past April? kind finer here. weeks since or curious to over around month the what on communities the moved to any X Just sales through if have as of rates is trends, in of traffic sort pace happening

Michael Forsum

I'll one selling take Matt. And terrific. us, spring season first. Mike It's the again, this been for has

numbers orders our in closings indicated and thereof. that's around think also I our the then

happy we're in our XX homes, interest to strong side to deliverable of that least as historically. the new particularly of very today. market of dearth interest business roughly said, we're reflective responding a market, are home homes the difficult they that's with which really So continue days, in that there show being resale the rate is But to as available within at consumer also is XX out it

mortgage to is So it commitments and not it almost. requiring daily us be active in which moves forward buydown doing cheap, are

cash also. then so a And the a the or competitive backdrop terms focused the of either incentives our to back against said, flow to you day-to-day around month a moving are will everything is have end what and We these flow. is has to and against this evaluation X of in debt rates can do manageable our and drive are and assessment we absorption what it month-to-month to rates we around business. also competitors appropriate business John continue at community existing to we consistent posturing again sales or a doing But -- day, per cash continue believe committed and week-to-week of to per going

to going as debt. little and better we so acquisitions we and structure down reflective be cost then a that [ positioning more of buy to generate it bit on land and we to as business debt up drive go We're of these ] cash And and tick our is redeploy the do bop into may the forward. kind our

jobs that bit margin, markets, of which, appropriately are that take as is things always seeing do of maintain mitigate doing cost the absorption we elevate we respond, some just offset pricing to can. teams the the X% a associated maintain in our of go can and by to also the to margin of best to in amazing but little way, pricing increase where not to for to X% sort we're It's So some the our keep of do opportunities crazy, mix continue to trying we're those our us to able little sort X% forward finding and we're we it. price costs with

Operator

BTIG. Reichardt question, Next with Carl

Carl Reichardt

Just in April Antares much did and Chris, a you X? in housekeeping, how backlog pull from dollars units on

Christopher Porter

from We're numbers Carl. still right did that far haven't backlog We in through and -- those as but we as communities XX through have numbers, work we there. disclosed don't that pull and work now, we'll those

Carl Reichardt

the think when accounting you do know XQ, assuming? will And bleed Okay. I'm off you purchase by

Christopher Porter

year Yes, about in to probably operations. be of XX% it will the first XX%

bleed off then So months the time and it rest next it slowly months next between to after X now year, . will XX that. this and the of over of

Carl Reichardt

Okay.

longer. So

Okay. Can traffic the various about a And seen price the on up then, you performance I'm curious question. rate talk conversion versus of Mike, differentiation points? just has or if sort sales? last or bit of entry-level of little terms across in a following move-up sort

Michael Forsum

this a whole and me with a But as time Yes, came it we each been the starting each independent actually my because And GFC, now have of moving to are saw as we're of I now when opposed markets business responding lot to it step been And is. is of career, regionally other. course to the of actually breakaway the country it's first it's more a where fluid, little Carl, you sort monolithic. bit the evolving, was nationally. regions of see pretty out It's It's other. know, interesting interesting. not over

So everybody is encumbered by rates.

one markets highest market. highest well, very our California ASP a incredibly doing actually It's being said, -- with of that in is Southern So strong healthy. our

price the balance there of offering points. of and terms in It's healthy out that's

is. having we and buy-downs amount a have per well. rate real the on it's Florida, really What we're relatively month market. there. So in have to mortgage $X,XXX of are their a monthly in mortgage the apply be to very, very force rate necessarily is markets affordable to a combination to of what a is of a seems backdrop rate rate the also requiring But payment, trying which the mid not one it's with and hand, a They markets focused one our buydowns higher that there. against least on incentives along entry-level constantly that -- do of are ASP lower most which of other we're very and doing closing payment, mortgage incentives us the is very, to driving monthly maintain

They Northern don't much. focused ultimate it if rate is, that it's took rate for it's -- translate you Whereas what very them. on they California, the get the their rate

getting back listening. really to be we're as So we're to the We're we trying the across out to we're there, is and as best data board trying us. but present uniquely responsive can, for it's what Carl,

Operator

Next Securities. Riley Rygiel B. question, Alex with

Alexander Rygiel

A couple here. of questions

talked you First, starting further a it leverage overhead. layer to particularly Can SG&A, you little on not as that about much the acquisition on comment Antares realize too corporate since more to nice relates bit topic? on is some to that going

Christopher Porter

Sure.

On of the the on SG&A when Alex, consistently on each And then you running rest G&A divisions And is it's say home G&A, about, between if I side SG&A, think to sales primarily variable right? within X.X%, side cost the layer that's division. layers sales our the in your typically there. that's of pretty and X%, the it's it side, that. on the So of corporate in roughly X% and revenue X% of

G&A So at up any won't we back the on side we operations, et just on some acquisition perspective layer cetera, of one. but division corporate corporate their into that from will if that, all the you Antares with pick

leverage. pure a from start just leverage that so standpoint, that will And improving

Alexander Rygiel

down road, of SG&A sort a get we look When the a at sort have sort to? as maybe can bracketed revenue X of do of where target for of year you a or maybe Excellent. percent

Christopher Porter

Yes.

is. I to the we of get to think -- where back the think close we that rest of industry can kind

over and But that grow to the matters to XX% continuing XX% industry time. typically we size can where we that out lay that line where things. think lot a and definitely is is side of of the Now is between top

Alexander Rygiel

And back of cadence talk in now new you and then into Can a earlier April? question. the to circling March bit an about orders sort of January little through

Michael Forsum

selling Mike. bit very the through it's season consistent Yes, guess that as for week-over-week spring better is -- it. cadence a it's and I Alex, selling been go season. Week-over-week little us we strong actually has been a

building off excited as about, and the a then to a here then looking the brought the book order a into healthy pretty position in with the subsidize then finish to be good us what we year, of the summer again, strong. year we're first in has we're and months go So backlog X the summertime market through and nice it and

the from pricing our buy-downs, offering good of So I resonating marketplace. in mortgage think standpoint, incentive right mix our our is rate and product

Operator

question, Next McCanless Wedbush. with Jay

James McCanless

What to higher more raise time wanted going earlier which the talk and increase identify are there? the in what's you comments on a rate that same you little about, with to prices or a at is I touch a could that buydown markets. are able mortgage some those on bit markets price

Michael Forsum

Yes, just to that Jay, I Mike. it's make comment. want

it mortgage get we're said, against may increase. we it cases, of to I a able In of we'll cases, may in some we're where advantage, our markets So pricing in And buydown fixated almost go the after full get But be any every benefit the on price as a little currently. increase. can one price some a we wash net that rate it. on really do

Florida, California. raise doing said, Florida, absorptions continue to now. competitive the So prices, in that the market I as in northern there. best Southern really been Arizona a can part we of had very, particularly is strong very we've right We've to

move as neutral net Northern through in And California. we it so there probably was

a terms like release about just past X%, raising We're running. times, talking this XX%, driving the fixated in your of as release from as reductions we're little our we're watching cycle just to but getting raising it's well cost processes in point, It's advantages on and ticks consistency above bit done little But now. spend, from matters the which here gets XX% at through probably along the prices. when everything mix with of because a increasing our of we've right a market there, incremental everything not

can't to get you on depend You one through thing this.

James McCanless

the a what ask in want for but expecting Got and community and Arizona to I this markets? California second, second markets year it. new for X you're you talk about could for maybe growth a about those

Christopher Porter

I I think -- Well, they'll that company, consistent the of which growth XX% be is with to there. organic the think XX% a rest

either of I see those So don't that one would be any different overall.

James McCanless

if all able you grow remind of in could pace debt? then are be to also, of to And just going And us that year? Austin. about the this of openings more the count a you XX% to Is be going Antares

Michael Forsum

Yes.

locked which just So our Austin. they're driving We towards. last need available that to we're in loaded have the to communities and to really we're going us open, couple get on

large We it. multi-segmented about have community a in [indiscernible]. community a very It's excited there,

offering. giving so our of very breadth full the to close And they're

open have Jay. we only Chris one open that at deliver pipeline towards which selling. slots XX point end would as communities as and communities in to I along, do for that be and We online will along the as running brought they way of then Antares, the actually communities roughly coming we have acquisition, and the the year identified that's well things the this controlled acquisition continue And said, a through there. So believe and have

That's there. XX fully and excited. great have that super sales over marketing a help And from with our to is standpoint May from transaction. integrated I was our eat really look team have a We we to plenty going goal. by growth. be So we to

May and manned branding communities be longer will Homes So our sales They external through no Antares if all our we get forces. of Landsea the with will on on full XX, and exist. through internal website

really in area. ability that better, we're of now our So around smoother excited integration terms to about our faster, get

And marker well. our all there as over we'll bring so of

So excited. we're

to I from Antares exciting think if things come there's here soon. some

James McCanless

of And last are And costs, year? you up much then the about about kind of for the are what wondering rest of increases year-on-year? have, thinking just how the those I land question

Michael Forsum

is Yes. and is Unfortunate that downside sales holding incentives everything through great. sellers land downs think about absorptions buy the

of them So and It's any prove trying little a are through from bit residual. pace coming hard drive lack the to of of our absorptions to steeper land the it getting us. witnessing cost sales through the standpoint or we're that

crazy, from a not So single-digit they're totally go would though still opportunity I say they're say And I as percentage really to I'm really we I that opportunity. if would but about sure changing. not increase honestly, going that see

forward, we're not in going terms land in tighter. for little of COGS, higher to basis on only also our us taking but what be our So in, is factoring houses move longer baking it's to going a bit

costs So control going to that business in of to kind offset it's things continue really to and compressing going right we are and nickel, bit, to to all these just we're those can't like find -- process saying every have little the a I now. was earlier our in

John Ho

is Jay, John. add, would I this

control Mike over X,XXX years next acquisition that our the just put now. us destiny Homes, lots will gotten the XX,XXX. to so our [indiscernible] to over we're Antares several that of now With mentioned about going of add We've

a be on a sort think of the to building really talking focused to find lot and the at really It about beyond. bit little costs XXXX some future years? -- flexibility really, was Mike able gives of land good us ability about Forsum in or for other So to supply opportunities of take and years

Operator

follow-up a have Reichardt from with We BTIG. Carl

Carl Reichardt

the of norms course to so in the trading? the change question, of versus next or sort one despite to I back process your John, year mid-XXs. is your Obviously, where debt thought reduce paydown. over want know stock you DTC that on Just the Does the buybacks on repurchases

John Ho

useful as in business, this growing a our been has past and but never at buybacks leveraging been the stock the business the the Carl, you Yes, guys tell We've it expense of can year it's tool. scaling SG&A. used

continue we that can to do demonstrated we've through acquisition. So also this that

to the capital the past Now be toolbox we debt first. to we get like -- thinking never debt use cash shareholder can And we tool how reducing reduced slightly and to in to then flow generate But as will be We've grow business, on growth. we've been able then continue acquisitions, to additional that will shareholder got done contributions. reduction do expensive the And also with in in And debt. distributions. our the we thereafter about up, we've scale. that we ticking be for focused it's another

Operator

further floor are like I would John questions. the to for closing There turn no Ho remarks. to over

John Ho

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

Operator

today's teleconference. concludes This

time, this You and may at your disconnect lines you participation. thank for your

Landsea Homes (LSEA) 1 May 242024 Q1 Earnings call transcript