MDC - Earnings call transcript Q4 2017

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Operator

Good afternoon. My name is Matthew, and I will be your conference operator today. At this time, I would like to welcome everyone to the M.D.C. Holdings 2017 Fourth Quarter Earnings Call. [Operator Instructions]. and you President conference. begin Vice McCarty, Corporate may Controller, your Kevin

Kevin McCarty

call. you, and XXXX M.D.C. conference ladies Good fourth and earnings Thank morning, the gentlemen, Matt. welcome to quarter Holdings

have On will for Larry Officer; the be Bob Financial that available Please Chief replay. [Operator Martin, me being this call today, conference and Mizel, and is Chief with Chairman Executive Instructions]. note Officer. I recorded and

replay, the For information visit website at to on please mdcholdings.com. our access how

and filed now by And that opening remarks. certain slides. his is G Regulation posted to the today. required should noted will financial to to non-GAAP in responses These our factors Mr. on over factors flows, call known and information Form statements Larry, or webcast expressed the Regulation by from condition, call risks, that the statements also be call, which results, XXXX uncertainties noted may the over related statements requires These certain to prospects set to company's that G during other performance website should for Any achievements information those unknown results turning different SEC statements. forward-looking forward-looking contain the the company that could MDC's meaning actual within or forth scheduled accompany conference of the of this and performance is that SEC turn involve to XX-K, Before Securities of may the and strategies measures. results, and cash Mizel our with other financial made it Private the actual financial with Litigation cause questions, achievements the of the implied company's including Reform operation, materially performance use be impact be are be XXXX. It I or Act business,

Larry Mizel

by is few this income on quarter Act and impacted to unique Jobs million enactment generated More these XXXX this revenues $XXX related the Cuts share. per a sizable in in pleased both We successful was on our levels. $X.X release Thank year. income, issued million that earlier income items in prior fourth we you. XXXX sales from year billion including announce increases which available for quarter a December. of many charge Note and I'm of home net $XX.X were net morning. in the to us Tax was $X.XX or very of items, the press detail significant

more since sheet balance in to pretax basis in growth strong approved us additional almost and industry our steps for during We we additional Even took of performance as purchases, our our in improvement year XXXX. conditions our XXXX, land and strong quarter to homebuilding than enhance approval our double our we XX,XXX to given bottom equity will we further level for purchase future which have the by third require at capital financial accelerated ended already took lot the markets, was The our highest XXXX. was more steps Perhaps with year-over-year of point the operations. company. up line supply activity though invest controlled its prepare total our improved XX% has of in XXXX. equipped for lot returns returns, position. our handle to a seen than evidenced Our We on most XXX top more lots the importantly,

rates believe so, advantage million. is In to year, outstanding interest doing rise. to a as senior we added to which we due total During XXXX, average notes the $XXX XX senior the strong note years, our to started $XXX pushed our maturity bringing January almost amount have million we

XXXX. million the and end to increase a up series. homes fundamentals, to continued series our fourth accounted Customer helped for the these including These for has capacity the from capital we XX% to This solid home cash $XXX to December our with activities, across billion X% Seasons In pushed an average with earnings market a have million net orders of XX% the first-time line country quarter, our prices this its ended spite year setting XXXX. our value the unsecured a growth in liquidity ago. the same backlog $XXX ago, for expanded year year, With to In in $X.XX combined a count. strong focused quarter community quarter in segment, XX% interest result, than lower our credit sales, under we stage rose to home nearly the flow XX% year-over-year projects addition, maturity this by sales from fourth XXXX. grow. of the we our from active and of in prior XXXX, at year just targeted for economic almost industry of year. of over a improvement the Supported Increasingly, homebuyers' the on in extended higher the drive

of For provide as paid consistently our almost part years, risk-adjusted we returns to XX for strategy dividends have our shareholders.

XX% positive financial in dividend to commitment start our the of On quarter. pleased call to for the in were outlook we equates Martin our demonstrates fourth financial business strong industry-leading and dividend. to XXXX over dividend quarter. shareholders. the XXXX Bob? dividend our our X% the highlights We now $X.XX our our per basis, cash to quarter annualized and cash an enhance confidence fourth turn specific first Given more share. Bob position, and This prospects I'll in of increase new stock continuing the at an a declared our

Robert Martin

Larry, Thank morning. and good you,

that want slide, our a were I in to Before the few release. overview leave unique highlight we items

charges the been quarter. in to big million are has tax our X of fourth and other XXXX, in enactment items of December for combined line tax this release, First Tax in our resulted in for that of reform a all, The Act Jobs clearly quarter. topic addition outlined Cuts earnings the the $X.X with XXXX

all in of and out stock possibility adjusted is the could interpreted be I certain have that the also items year during to preliminary estimate legislation share full average reckon and it is excludes shares be This our discrete that impact all may is year. XXXX practice reflect our it there we effective and amounts We year. XX% the month aspects old, the preliminary XX%. Looking the in simply act this point December. a only the tax of rate ending been was paid our dividend into differently put wanted as estimate a because to that recognized tax believe per for of as X% for potential periods is range to any that the forward,

Moving on.

Our to to home primarily decrease quarter due $XXX.X for to were homes closed the sale fourth revenues X% in X,XXX. XXXX down a X% million,

closing conversion the call. on rate backlog issue slightly that year about We was lower believe we XXXX higher. our Our than could Colorado. and been the the lost in range backlog than but to rate prior XX% fourth due conversion quarter previous rate XX have XX% closings discussed XX%, for levels higher joist to the We modestly Weyerhaeuser

the due this issue. year, to about we For XXX closings lost

closings. many we the first to forward Weyerhaeuser quarter, Looking should of pick up delayed the XXXX

sales as base quarter cycle in with quarter backlog the rate other However, strain conversion first the in due the our from by be times believe quarter. start the with in impacts about in process homes backlog that to unseasonably places fourth the backlog strong XX% that most lower rate finish, conversion is defective for of result year-over-year quarter we joists, first of due achieved we the overall. improvement which defined in to our our shown to range, build the the to is the ongoing but issue this conversion also part replacement to are will days but our XXXX to XXXX. lower markets. XX% In year-end times, likely the dynamic, of not than as homes X% backlog only experienced the XX% most we the close in in homes company-wide not also of these subcontractor for first the on The Average rate decreased are

by increased Weyerhaeuser and earlier sequentially cycle Florida However, to X% due impact the partly hurricanes times in this about of the issue the year.

our fourth Seasons Florida only and in from closings had Nevada ago. closings Arizona, X% a markets. year mix, the We collection As were for for Colorado, X% versus our product of quarter Seasons

average prior the Our to selling year. compared price flat for of quarter $XXX,XXX was the

with our would However, average product selling have price closings, X%. about Seasons been up

sales impairments as fourth versus Our percentage to partly home just up recorded the gross from margin XXXX in for impairments in of $X.X XX.X%. quarter $X.X to the year-over-year due points quarter. million impairments difference million basis of XXXX The XX.X% fourth we was is XXX

material and our of that partially Additionally, in our were we labor margins increases many from realized benefited offset increases price which by markets, in costs.

higher we average the the rose gross quarter. amount that per generated XXXX With in dollar price, of $XX,XXX the percentage and about flat by margin closing fourth margins $X,XXX to selling

are our We percentage XXXX our going to gross quarter the into backlog gross year percentage our optimistic exceeded realized margin in for the as XX.X% about fourth end XXXX we the margin closings.

actual cancellations, be we could other level backlog from margin adjustments cost it impairments, by be factors. should and However, the reserve noted gross our realize in increases, that periods actually impacted future

collection increase is positive Seasons margin of which positive as the in having units of a impact, our in and partly prices It the us to on has gross we and representing a higher overall, a outlook Our the of the than the allowed also a the having end strength noting and is that function worth XXXX of industry the backlog backlog our incentives margins subdivisions. is seen economy XX% whole. have in at percentage majority limit

orders adjustments dollar of infrequent, tax sequential year. million the primarily our On the from increase million we as to fourth fourth was for a our $XX.X the fourth last The The by acceleration our up strategies. million quarter of only a XXXX The the country. The The and planning our slightly quarter XXXX for business. of year was orders growth a we incurred average to million, increased expense. count. administrative to was net the future $X.X charges account the Our increase solid charges increase headcount in the explained saw in of of the for included by XXXX $X.X absorption XX% $XX.X SG&A that to value our million, and as increase of up a mostly was primarily expense to total increase driven X% is in general continue subdivision expense for decrease that quarter, net which monthly $XXX,XXX average our would of quarter mentioned. across active driven as describe markets million prepare ago. offset our in same general XX% $X.X administrative I related quarter, absorption in accrual $XXX.X demand remainder was most I a year-over-year The price the the third by rate rate basis, our of was just the XXXX increases and of execution quarter by from in from somewhat dollar infrequent

As looking Larry homes. our have marketing Seasons mentioned we successful been in for product affordable to buyers earlier,

For gross net down billion, of backlog of as the year-over-year the gross up year our fourth Seasons beginning at XXX both end on down new ago. of based and at XXXX sales, dropped ended from of $X.X price. cancellations X% of to XX% X% our And XX%. the the activity. strong at only XX% a increase the a units Overall, selling an as slightly percentage in of quarter count the sales percentage XXX for of up a because to average for an down accounted XX% on XX% cancellations from third Active the a orders, value We of XXXX XXXX level and which from subdivision end quarter, ago. were fourth estimated was was XXX year-over-year year quarter, homes slightly quarter from XX% backlog sales from with

the continue quickly previously saw meet occurring anticipated. large also to more the largest a during strong in and see that where of lower due not Washington activity due to than level our Maryland disclosed closing out returns year-over-year sales decrease We subdivisions that resulted expectations. year investment did we a in decreases Virginia, to

Colorado Additionally, competitions in these is new subdivisions of subdivision resulting for count. the offset XX% in fewer significant acquisition Washington acquisition year-over-year than most with planned. has the a to new active decreases strong, increase in the of been communities

at Looking graph on the right. the

sellout. the In that third the of likelihood quarter. soon-to-be subdivisions count more are end of XX, relative increase active the since category in XXXX. indicator than greater subdivision other we the we time in subdivisions opening subdivision XXXX, to in with we positive to XXXX at the For targeting of category the With words, had us to are call XXXX. on first mind, verge December an just that This compared tells to is couple of inactive over our active quarter, next those have that active soon-to-be the more end there a growth December subdivision our count XX% quarters XX, from the we

For about for communities, for XX an quarter in of were acquired The in the X,XXX in rather, million from operate and development are year spend adding in and quarter was the Arizona, acquired million. lots, a additional fourth XXXX lots California, $XXX concentration we lots was Nevada, XX%, state We ago. lots our $XXX we communities, lots almost $XX we After XX heaviest Florida spend the in expenditures, the every with up land new finished. quarter, fourth XX% acquired Colorado. for million. Acquisition in, the including

We mix, quarter higher we for intended of XX,XXX or supply at which delivery is XX-month for collection. a X.X-year controlled the quarter lots the of the same With This lot That from XX% on approved state owned ago. to end via fourth we ago. the during product product. of introduced Seasons a same in represented at trailing XX% increase year. controlled acquisition This lots, point the about X.X lots X,XXX was during XXXX at at XXXX since XX% end the XX% year prior significant any the year-over-year. a the of from over a other during the basis, the are XX% the up the percentage a quarter amount the approvals of At is with of end we lots acquired a from Looking year increased quarter our fourth quarter total. the each quarter, than the percentage up represents option quarter, our

$XX pretax basis in on Our on up recorded quarter been to without equity over XX months still of related XXXX. points our year-over-year year. third the sale would return return the the at points million prior XXX of end Even up the last basis the quarter XX-month XXX of is have XX.X% fourth the to XX.X%, gain investments, equity

measures our financial to the now some of of Turning key position.

issuance line would the growth prepared points million net year, year-over-year higher XXXX. add-on the than liquidity of liquidity $X.XX for start debt-to-capital time, to increase remarks. in optimistic basis At about notes. Our decreased by to prospects Overall call feel and to a to credit of in With senior more our grew to we backlog billion, XX.X%. we million $XXX open $XXX $XXX up XXX in year-over-year by for by like the million driven our That our million concludes questions. $XXX this

Operator

[Operator Instructions].

line first of the Sood Deutsche Nishu Your comes of from Bank. question

Nishu Sood

about last serve very ramping wanted land 'XX obviously, accelerated. land the I to spend you with question you ask Larry, well to demand had spend. having that a is up going in And of year

can't say, to later leaning first pull I So cycle the now here wise serve since 'XX far, into XXXX, a to of XXXX, back." last teams you bit are has the again to on "Hey, we're cycle? little cycle when we in and the that a We were well. little gone will And management lookout bit think help though. too going you that are are we're getting What back, amongst time signs and pulling to the be for, the you to warning in kind this especially later back it's obviously in

Larry Mizel

very time. identified at don't concern we gave we're XXXX we're in elements this I The time. strong us give in later believe of that us in cycle. period concern don't I a believe the that

economic The in in elsewhere be the only States, was United it but this to The not period, markets speculative fortunate very world. is are we're healthy. in housing not capital for the think 'XX. desire in demand like I and

we that good a and a a place see much ideas. to to have quality for We the were circumstances family. buying desire What the where live We people want see solid homes market speculators raise not is mortgage different. do

they decide of that's married new providing. to of what their providing homes We're time into it's a early and young in?" apartments this inning. for move XXs us Larry, would into -- "Well, real out everyone the people we're we're been baseball, what late the XXs and and those a And scientific that As generation people. have fourth home, family and get about come my you would if has course, about how the because, I said, it, but And inning of was in say guess put there's nothing

Nishu Sood

rate drawing tax higher and the Got it, profit your in a Lower for another post-tax generates experience great. the your builders. I long question, appreciate margin corporate obviously of And kind thoughts. industry. profit on

when typically, construction as there's see with appreciation. chain, new home it rising obviously, in excess land Now a home the price sellers, up profit with ends you

it that the builders is since land with IRRs, debate rate it lived I at And builders? corporate it up? through tax end clearly, many where so You stay the Does end now does does use obviously cut, was up time the rather last sellers? pretax believe. Or

So your from windfall corporate tax rate the are end might what What up? cut thoughts happened where about then? their

Larry Mizel

Well, dividend focus by I M.D.C. demonstrated we done on think value we since publicly increasing has our XX%. what shareholder

great business in was and housing dividend, our a preferable additional our affordability we on think builders deals for the the believe and give the is what land, an return the discipline results pay that's So discipline to I way. the they amongst shareholders there's to a and the market. of judgment with

we're on we X% went XX%, quickly from to can you moving see, and affordability. As and focusing

deals market the as the the in all improves, with focus affordability markets. the throughout really country housing So

in of that industry we the speculating. know as builders developers strong. also and are a the place. I there's speculation you fortunate economics conservative tone see because everything quality we builders very in and necessity The an market take responsible. we're economy the provide some that see good that the the don't environment, when try do. But we return They that be industry shareholders. financing is to don't this are aggressive don't builders in to than a and in ability in see There's -- the we're their land get And is I don't are very the more as land the So clearly. have know, land there's because to the strong I

Operator

of Citi. of comes question Randow from Will next Your the line

Will Randow

issue down a I repair guess, joist will type tightness is Obviously, for where a line And X and the you on the times it like what what a quarters sounds or point of this particular, big deal. of become see and the do in cement, terms in lumber? joists trades seeing buckets, meaning cycle these are nonevent you nonissue?

Robert Martin

It but quarter, are certainly be close extend expect remaining the end that a to undertaking. will the second some as have do deal. the quarter. of to out to left closed it homes minority that we a big we the be may of There of We the is close It's lot XXX big the a the to believe that in first be year. of

joints electricians reinstall certainly, that with from the it's different of quarters come of to they who -- down on. and like to put joists. though recover subcontractors, we're terms to in can also keep continue a the something replacing an we said, that we've who line, something identify is number parties house All but we have impacts a those to few it's are think going that the us folks the done additional that. items in In even eye after It that install strain group, to tried on help the

Will Randow

to of gross should larger more Then a some by you from this it inflation, for can your submarkets. in think about And how margin pricing talk ethically, perspective of if relative that we terms year? about

Robert Martin

go what I mean, know would break have by across country far it we're submarket. down we experiencing to able don't that the so generally as increase speaking, I to even prices. been I is,

can been at cover to and the quarter increased the increases backlog to we view increases? clearly, commentary something has the closings goal is the foremost in about we've X/X of of we profit margin that been prices Relative not we first in to the little than increase being -- XX.X% end bit more far, that year and so the partially through just I fourth look yes. notion the the prices you And the cover fourth that quarter, we can the cost higher reflects and cost with able think costs the as our only If across gross subdivision, but price realized with increase than a about country that healthy. our And that's increases, answer the that.

whether -- not is that into or So be would a XXXX guess. continues purely

Operator

of Your John question of America. Lovallo with the next Bank line comes from

John Lovallo

count First throughout question kind kind of the the guess, should growth year about How community I XX% is year-end. that on, of by think we cadence?

Robert Martin

and nail little question good because of and give to the And opening of basis. the you always subdivisions. reason the quarter-by-quarter a of the bit is a tough a it's of always terms on It's timing have in take

I think we've of it. got some seeing chance

open during a goal many we see to can and to there. have selling season. But as we have of we'll if wait We get spring as the kind get

John Lovallo

a And attributable about Okay, in do terms two And of been expect to think then headcount headcount? past heading expense continued ramp should quarters, there's we How kind some XXXX? okay. into of you that. that G&A in

Robert Martin

sales you would it it's headcount for XX% But or I'm folks, on that mindset. continue XXXX, see type income at through to on a much With construction point on that about headcount by XXXX, that an folks increase you're just said, the be quarterly go this basis. more year-over-year. of to lines surprised in I when just in but update on would folks I for up increase statement. say we'll not the there's the for G&A talking increase expansionary in G&A about always who of the line, chance other the

Operator

Stephen question Evercore of comes the from Your with ISI. line next Kim

Stephen Kim

last, amount say, little all I could talk of all, about the a always decade the preselected are of an is you seen have? manner a same over or believe ask the willing whether spec at part guess, so, buyers the on you that build-to-order seeing first pay larger of some buyer to doing. of type for of to you activity as you choice we're Wanted an about think, increasing increasing competitors bit let's to your relative to do that Or we've as receptivity much the model in inclined and product? today they

Larry Mizel

say, risk would run building order a of all, building of believe is I home. first factor part risk-adjusted lower our of concept enterprise. we a our in discipline there's spec return as a our to We presold home versus

believe work makes spec, having come We times, profit the also spec. someone the in process run of good cycles starts, we're believe that that gross which capital they willing in period also an way months. quality which in little a for acceptable on larger our go very, of that special, to home. which it enterprise, better think, pay in bit the not believe buy worth And a but -- included, need we buy would truly that's measure looks a a manner our sets there's we finishes. versus a market dirt our this cycles with is different to There's to preferable us out very something would like and being than And land. with we that, their what to able that on now, These that's home, wait is preselected. as that's like way a off different we when over and there's have will premium, decor a I to amount are the quality pay certainly very extent also people find home consumer's decades is latitude dirt available the in for that's which we in of high. deliver markets, in found that that builders more standing real the our a more is because different built operates, someone we a margin a in a And colors market. everything's to to home and customized of to a in where a figure everything's is buyers company to is that what to home, multiple The which manner in We find that sense up

So we way just is is to of what we what other and do run an and preferable the our do the doing we we're on like we land believe way risk that enterprise. find a it controlling elements

Stephen Kim

Larry. though. Yes, appreciate that, a that follow-up little I on can If I bit

talked a had that spec might perhaps, to cycle the a one, in. fact could customer pay a certain You be about are because the move right for willing there they in premium where points actually

second you been land your But rather about question to half seem what maybe your wouldn't we in last last your approach the about home think of were years in more profile? more aspect versus, supply the think consistent like my or there's time, land pay conservative very a comment something for the more. about your of And decade. years. that or carrying terms concern said be response cycle overall inventory the around willing of or inventory Given because where in you I at this risk two And the of to reaction to portion let's said that's where you maybe might Nishu's say, the about we're actually the more in absolutely, cycle, when tolerant specs then was you of that. business. would the talked are then cycle, inning the you're customer company three just your fourth you the think And you be, might in than It like linchpin you to

just reconcile about if I thinking land your wondering and so said. position given could what with And conservatism you was I your

Larry Mizel

best in comment I think you're some breath. I'll of on them. asking questions to about my one do X

do And very what the ground. a builders so can't maybe it's their the time is spec doing and certain homes able and usually XX,XXX, that the have limited because super limited, market, they about carefully. different. different each We're large business is we and facts specific you spec a define One volume it's year, time, a there deal to as of to that's markets time is high industry the mostly on volume On really times, super the I more need it this at of do manage premium to period spec that they do that's XX,XXX we're and high gets with to a in thing what several always well. model not is different. But

been three your see two and we in capital we three there's all, we And we we one in is that our the and our If as conservative years. be market in our at may look we trend. expect land to indication long someone should we trend make a else's that And increase as As that After that most and our positive lots, believe as which the comment, we or believe to inventory authorization in clear expand the take available industry. difference for is projections opportunities, the between years guideline of -- usual advantage that additional it's on two did has place. believe projections. market a and of our

Operator

comes with Rehaut Your next from question Michael JPMorgan. the line of

Neal BasuMullick

for on BasuMullick Mike. Neal is This

I bit guidance Seasons, count for your So a with improvement? the guess, absorption more at expectation XX% with guess, from community little what's year-end I and rate up starting contribution

Robert Martin

we that something not That's project.

has As rate, but going we Seasons forward. we absorption we're said to prior project calls, on not that going seen higher have a produced

Neal BasuMullick

business the add not in Portland? kind bit I'm reinvesting count. helpful. your talking you're that's little into entry in and of so your on sure growing guess, community it's you Can remarks. prepared a But Okay, if I about

Robert Martin

but due Yes, a of acquired that not in there. actually couple We have that this point. diligence there communities we've at much do nothing out are

so work a not in the the huge a So quarter, impact in that's progress, greenfield fourth to quarter. still

Operator

of question comes Zelman Associates. line the next & from Ratner Alan with Your

Alan Ratner

know was main I on going what So Seasons you're the bit absorptions, the guide to the strong, a acceleration. several could identify you But see increase the to strong maybe was just there, offering I easier. times. mentioned especially first comp I little not X hoping you drivers know for the I as you that but really compared printed know you of the the what quarters was year.

is quarter? function is in the what your portfolio really that? a demand of curious, footprint you, in case, just really Or if strong during strongest? fact, do a you towards the buyer entire acceleration drove the that the that mixing where demand now see across think And entry-level was did your So was more

Robert Martin

I Yes, the quite better. market's simply, think

We housing market. are a very in good

I think that. economy the supports

adds to we're what we right has looking to us I offering You've beneficial forward. and We coming seen see margin and results whole to for picture out stock others happened together market. to now and have The able is that code to the the going that's with are the that tax that appeal consumer affordability. been what just that reached achieve. we've what And think to changes

Alan Ratner

maybe of then the touted that lot not as constraints there of kind other I strongest a that, helping whatnot. labor growth And perspective, with starts a something and think availability strategy spec them labor it. rate, like the that only had and type that predictability also there. from a the perspective, just just because the demand the XX% the at fact Got from what's growth talking have industry And of builders of be today, lack that consumer could about absent capped like but across the some of been concerns trades

pretty the to that given can growth here, labor far seems you do relationships dramatic nature Do of previously? been your volatile like type now compared feel now your you lumpy think a your So labor? be your growth this as backlog rate where to expanding or how of as you've right clip fairly handle about at as

Larry Mizel

and with as labor to we our think grow. have they steady I to ability continue relationships, quality demonstrated grow an supply is

able very Additionally, and we're all our busy. -- keep of to additional trade to subcontractors we're attract It suppliers. able

And higher force, able growing. unemployment this world getting The well strong and housing, think down -- I our in are say market employed. between one would this in them of many the that chain. it more the goes the are is is there's number wages was has past, are and trades and to but don't also the job More -- the whether many steady was, economic general very think, are low. up and I a people and deteriorated left percentage they into the years And the reasonable. many the recession know of X% back. coming And what X% of -- that them to it are GDP the that or So construction make was during people and it bode X% was industry the in And for in country. I that

normal So run still are rate, we We're the below is the marketplace normal where rate. you're to to but trades which but quality a the peak, the seeing less home. necessary we're order the only into capture back at housing coming industry at produce able grow that, even than though not in run we're also were and substantially

Operator

Your next line question from Oppenheim comes Dan UBS. from the of

Daniel Oppenheim

market seems so Just the wanted and are to a lower And there. I ask also of limited relates noted there community cycle time you terms such, in supply subdivisions on buying more just plus had weren't land pull Seattle back -- about where and was of some or count have least there's guess, competition as really questions that that buying in a much. that, about where to it we it the land at the you did terms

how view land? just so being to you terms time be comments opportune it the in to of And relative buying other an do that

Robert Martin

Seattle It's really from actually positively. we it's the And the difficult market I acquisitions, to we sequentially I find absorptions. think to new view to subdivisions have healthy very year-over-year where had rate With buy. would land say, absorption point up Seattle, is, an market very standpoint. new good the and

of work our during forward. to recently that will we out there. subdivision have able and we QX So has to continue transactions some on new the on approve count more been that acquisition going weighed But

very interested remain presence and So market we in there. committed expanding to our very that

Daniel Oppenheim

we controlled, approvals, In being of the or like something count, end quarter to first lot that's whether at terms or second -- look see the owned quarter? the -- of where first the we as should than up

Robert Martin

that but I to it's certainly our intent presence market. wouldn't grow in it, our time

Operator

line next of KeyBanc. Zener the Your with Ken from comes question

Kenneth Zener

could to if wonder I talk Bob, you the orders.

I think, Larry, you made a comment about this.

in almost Your to usually there XX% lead again and years, pay last data. absorption flat what higher that year-over-year, seasonally three XX% about the to when is as Was objective prevail years was happen would would a -- much, ask sequentially XX of picked normal up because usually I in it's normally, well pretty given these so is quarter seasonality you communities? And seasonality an do first you the reason delta? in that decline observable think the

Robert Martin

I we QX you're flat, What to better, absorption you you're last all And a maybe see, the to a at normal. there. that rate, QX seeing if we're years, demand It Again, Yes, expect going out I the say, saying. and roughly looked would when the you decline. think talk is about for again, absolutely in data was the right. market would we from in feel is XX the know what I XX% -- we're

those So seasonal it is bucking some trends. of

QX, to to guess translates would that exactly on As that not how [indiscernible] a how I hazard

Kenneth Zener

Right, no, it. get I

better well? would you think sounds quarter, it wouldn't. So will assume this to No seasonality it would persist, be like as reason

Robert Martin

kind we we're now. with I what going of that's results for positive orders, and very mean, Yes. had QX right for

Operator

Research the from line comes question with next Your Center. Barrón Housing Alex of

Alex Barrón

it the wanted take years of maybe lower is why XX-something-year the I capital. fourth in long-term kind about still -- thinking, the term, better X% Can the or cycle decision some just that shorter to your you expectation inning? given discuss maturity to is at to raise the at your XX versus and sheet on ask coupon X balance is

Larry Mizel

I what can to and position more the major economy historically. that the for country in rates, a periods us of very, us was the have interest now, the very I future economy wasn't of has as trend we think certainly, time whether within X at company. very upon of that And and unsecured to or asset strong will a the perceived X% normal transaction. less dependent especially in years allowing get will in from This around access it's industry the a this years industry I manner in our place, debt long-term general. in the asset in a XX-year the makes capital our grow of significant able as that can't you this expansion of good been the now many X X a back into Having believe and believe cycles fixed-rate last and think about that we company it's a it's to fixed-rate decades, decade, within been builder only market, are put us

Alex Barrón

the Got then, I just of it. kind markets. guess, to And particular reiterate thinking around

land Washington, your market, because go other your back? assuming strong going Virginia, count down is and to and is market enough Washington Maryland did the because understand that's strong? on then D.C., Or have is Seattle, are community But I down. been -- the you just the of for the B meaning it? is demand, they're part I'm And in because Which of investments the down Washington, don't So competition you correctly, demand? good one because very feel is returns

Robert Martin

second lot we're Sorry, of back because a Washingtons. here talking up let a for me

combined to So Washington And strong, And competition I where been think clarity's be that sell subdivision has our market decrease to land. first had our Seattle we've the very that's just the that there it biggest a have. us is in for I'll Seattle a the market, of refer and we lot continues at to sake. of strong, one otherwise in with contributors good count. market more orders than causes the quickly That, and for subdivisions fact might for it's the

a see years. returns. Virginia reduced the Qs of The the other good D.C., the we've greater a Washington, is And of the It's market last and deliberately we for past Ks we about as area, where that of this Northern part talked -- two our have didn't Washington, where investment. in kind market market our

you we're lot However, new still in improved. quarter. in that in. And caught market active I but fourth might the purchases we during market market have not absorption rates have in that it's remarks, that More approve prepared alluded did a recently, my the to it,

that any certainly of stretch a not, imagination, by market committed is to. it the we're not So

Operator

East with Your next line Wells question the of Fargo. from comes Stephen

Truman Patterson

actually is on This Truman Stephen. Patterson for

So I to bit gross a wanted dig further. margins little into just

X you're the this about it what driver spread margin quarters including pretty been market sustainability optioned What lot to Is the were a as For like talk the X running change? see? XX% range. first usually has the just all with above of And similar quarter quarters, looks on could 'XX, general BPS. XX%. builders guys in then suggest consecutive is you this that And this through most really And previously, now, of about you purchases XXX go XXXX? gross we owned versus question, XXX guys you about

Robert Martin

I So guess. a in of there, couple questions

I we a regard the in think we I that to comment costs. sales, to a with that And all, outpaced market's increase little prices. the has means back to with which that go little of the and bit had increase ability want a better have First the to to made margins is dissecting bit, regard

So bit -- I think you're seeing in a little a that of that there. of

profit certainly than margin Certainly, Looking not XX.X% in the the increases possible what price to forward. end forward, think could for be. higher going us you of it's gross will XXXX. our at QX versus cost talked XXXX of the some in our is XXXX what gives us sustainability increases But about backlog terms we be notion predict closing of that optimism

Truman Patterson

spread? margin kind of versus on optioned update the owned any And gross

Robert Martin

know consistently. which in No, submarket standard can a other on factors and really factors. you there's apply the as depend well, other is if don't asset can It I

having your IRR, that I can we look as to we fact we going which the by or a hard generalization a that is auction at do about So potentially deal that think than not. a improves you it's on are and buy that to whether that make something deal measure that or decide other not

Operator

question with Post line the of from Your Group. Andrew Advisory next comes Berg

Andrew Berg

your to growth in figure. back that on go to want SG&A just I comment and

of faster in properly of the XX%, charges saying if but should XXXX? infrequent out you hear in strip it So million the in you growth not like than imply, I the of any perhaps course SG&A $X.X fourth which grow, would quarter, million that over $XX

Robert Martin

that don't rate of level kind I'll really during let employee about how is increases said make XXXX. was of talked into say the that in during of think employee employee just in in you that estimates increase in if you're relates XXXX line translates don't I I that the XXXX. G&A did growth their is to What And everyone of XXXX, map I rate possible. count necessarily that What is to some G&A going XX% count although terms I to see of works. know headcount

Andrew Berg

Okay. home commenting out a dollar you how were help percentage Would here? the little of revenues us overall about think a on amount. it's you to should as as I in we care been 'XX bit or frame comment thought SG&A certainly growing

Robert Martin

don't out we revenue give Well, Yes. numbers. specific

some talking may an in quarter purpose fourth think the about $X.X number to are administrative infrequent I the not idea give expense recur. of you of that of that million general level were and expenses in our

as So your of your into have direct but I gets of course, little revenue an not much And at does a relationship home accounting go estimate literature there's sales going little that changes XXXX. a even correlation, confusing in of direct a as although as using marketing a has direct of couple the that come SG&A a to home revenues, bit you typically correlation for to commissions estimate. then forward effect is. a because think up that, sales with can other of And you then look whatever the elements bit

Operator

from And James. of comes Buck the Raymond question your last line Horne with

Buck Horne

quickly Just to line. going product Seasons the

are I average actually so homes higher far, margins generating think right you corporate that commented the gross Seasons guys than now.

like process about you you looks quickly different what's just curious, building And in Seasons So mix think community I'm that what production I up also, or XXXX? allowing mix guess, can that's the that? and ramp the process how maybe the do

Robert Martin

away. all, what with guess, is first regard few efficient, it I think what just XXXX a higher-margin far potentially what happening, product, makes more things. a of makes seems so I Well, to Yes. it

of all, build. less First to it's complex

subcontractors, when it's for Seasons out a it bit bidding more a you're cost of the the So and your estimating process. simplistic to little

what to the to build. It's are quicker We there. visibility have maybe a costs better

the line. profit in gross end think costs the runs and through some gross terms that some cost your that profit line of that overhead through efficiencies gives interest running I up you of

So there's some elements of that there.

product. of buyer to still even smaller though product, a a a moved really the can but as that's And The kind looking that to worth for a just first-time frequently for it's a I it's also first-time that other and it appeals they a saying element is It that refer house simply demand yard. still think product. customize not have down house nice yet we

it well. of it level. increases second product, I lower think So pricing consumers, what that the appeals as was to that And question? that types support to part multiple And price that consumer of helps appeals your because on

Larry Mizel

XXXX.

Robert Martin

during exact I our would represented it in number to can of that XX% forget? So for the last back again, you is approved an XXXX, were XXXX. What XX% quarter. the just I land acquisition, represented lots also of refer don't quarter, you. overall the How about for I have

So if certainly trending bit could see term, murky that long little level. that But far. a the gets towards you when that it timing out you continues get

Buck Horne

lot consumer age-targeted kind appreciate similar up of buyer? demographic affordable makes after go segment I That groups, first-time a thought speaking the older guess, types different adult coming in to or that. a to the have an product or of about expanding sense. And for addition guys just, I the of you with about active

Robert Martin

already think we Yes. is in thing of we existing captured Seasons The great our a that lot communities demand. about

talking complexities, that other other start rather I would think risks other to we when deal get really you with. restricted, age and you active not adult issues, about

something venture, to actually that going age least time, at not is probably we're into at So this restrictive.

Operator

back over this no to presenters turn for the time. further have any We the remarks. questions I'll closing at call

Robert Martin

thank Great. Well, for as call, we our you on being forward to look much very quarter release we quarter talking fourth and first again with our results. we you XXXX

Operator

today's call. concludes conference This

You disconnect. may now

M.D.C. (MDC) 1 Feb 182017 Q4 Earnings call transcript