MDC - Earnings call transcript Q2 2018

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Operator

Good afternoon.

We are ready to begin the M.D.C. Holdings Inc Second Quarter Earnings Conference Call. I will now turn it over to Kevin McCarty, Vice President of Finance and Corporate Controller. Sir, you may begin your call.

Kevin McCarty

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

At being call the Chairman and Financial finishing are Executive Mizel, today, mode. listen-only and Officer; all After Officer. in Chief themselves be note question-and-answer a Martin, and one question prepared On Bob me for a conduct time that will one conference at Chief which will with remarks, I we question. to our Please time, participants recorded request replay. we session that available this this is participants have and Larry limit follow-up

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

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

Larry Mizel

markets. quarter. community, has in year-ago margin affordable and X% good quarter the and points, XXX home believe homes. year-over-year improving of that of in you, growth the sales X.X XX%, per by housing Holdings market. by in we've consecutive Part sales strong in segments income metric. to equally our the today. up, performance XXXX. markets saw of of growing activity of more and us Highlighted sales strategy Thank in to to growth announce marked a was be quarter sales another focus important turned XX%. of order revenue wide pretax been in our as We fastest fundamentals our a this attributed which solid to deepest pick quarterly this one month of build the factor the this basis can This gross I'm improvement second generally ongoing per We in home an pace But we heavily morning expansion on is in the greater period year-over-year and of Company demand a posted in sixth than and joining evidenced M.D.C. homes pace everyone the call Kevin the pleased

investment locations, communities, increase resulted better for we’ve homes in with demand believe strong and lower points. margins Seasons in than us allowed in turn average. desirable these the has experienced at which believe future. now markets activity We our Our We in a and that in give Collection seen overall have prices control this The controlled future a has we will more affordable clear of the that us our company more we've the our lot we the community continue supply received very total where gains and year-over-year. to of To broader market that under in have will quality in the well share new a other we’ve combination home accordingly. XX% increased path into designs quarter well home end to market product potential land them lines affordable been end the market strength the as introduced have lots segment, price increased

up this end are quarter financial over profile. fact This to balance return like provides quarter. and of the strategy healthy result strategic our we emphasis controlled on place quarter, operational continue little helps additional Company. that flexibility growing by were by initiatives lots sheet. undertaken lot as With option of the call us to with industry. have maintain XX% strongest about and in our the an upfront future the our balance I'd optimistic Based capital sheets as of also the We It about tying the We're evidenced results of on to and the count more land possible, as Martin Bob? our this our details agreements. us that for turn the enhances one Bob with at

Bob Martin

Thank you, Larry.

pre-tax increased On improved net basis, the year-over-year XX% As for income our XX% after-tax mentioned, by by income $XX.X quarter. to an Larry million. to million $XX.X

the which was was dropped Act. XX.X% Cuts factor decrease The due our in increase. big the rate large net in rate to tax Jobs part and second to Our Tax a XX.X% from income XXXX for in quarter,

second this extended we XXX additional that that was to are include of addition, qualifying XXXX. energy-efficient discrete benefit sizable tax points related identification for to of XXXX the benefit was eligible basis or in credit, million the closed XXL homes a homes earlier year the which booked quarter. retroactively In for This Section discrete home $X.X

This effective range XXXX, XX% six final items the estimated between are months during tax estimating rate For XX%. and discrete we an no assumes additional of XXXX.

XX% XXXX those an for homes. number million revenues homes year-over-year sale the of quarter up in to average to price of selling in X% home Our increase X% delivered $XXX.X due were the a second the and increase

range discussed on the we that call. for previous was the was our Our backlog which at conversion rate end QX XX%, top of expected

the the rate than almost increase price in prior closed the to XX% of XX% to mix rate in quarter, of of the estimate highest was we for quarter conversion conversion increases achieved The year driven in our market that forward our communities in homes XX% history. from California. The selling shift Looking range the by both price XXXX. we Southern average was backlog be higher a in $XXX,XXX backlog third Company's will highest our third to our and across some price that

are versus year more Seasons ago. have XX% second to which Collection, We X% Our would been average affordable even of without only price a Seasons had the for grew the our quarter expansion of and our higher in Florida closings XX% lines Landmark additional have market. Mid-Atlantic contributed QX an product closings affordability Nevada, Collections Cityscapes that Arizona, we with Colorado, closings. and additional Furthermore, developed of in mind recently two

to highest we gross sales home margin XXX first represents of basis Our It year-over-year in realized since quarter points XX.X%. from the our basis This up XXXX. was gross sales was than XXXX. also XX level from the that home margin points higher

Mountain All the of absolute West in improvement overall. segment highest our homes with and homebuilding segments improvement from realized showing margin level showing the the segment sales their largest an the gross

profit that in second Company quarter, increase the highest in With gross rose margin our XX% reaching level per closing of to $XX,XXX generated average nearly its the we XXXX and history. gross the by the dollars selling amount price higher in

end quarter. at remained the level in even for gross the closings backlog quarter Our margin XX.X% healthy, with that roughly we to a achieved was during

home Seasons to level which Additionally, for coming our gross quarter gross Therefore, about second plans. margins a the product, from a more similar than our impacted new continued maintaining prospects of has XXXX our the by affordable last average of positively margin higher closings margin be to in gross optimistic higher half our traditional we're percentage at our a closings.

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

total for plan are was from XXXX hiring due the last mostly was increased the compensation to second that the up XXXX we experiencing. Our now cost year SG&A by to for This expense the we $XX.X growth driven million second did quarter. dollar quarter

hiring As home our XXXX, general given of stock-based to X% increase was the revenue of XX% associated slowed key many positions performance With administrative year-over-year, labor XXXX. and rate million the there for X% at tight the option during unchanged first on rate XXXX, were SG&A as compared awards wages half our only added in with that we Nevertheless, believe headcount, our compensation additional upward sale filled in market well based stock XX.X%. could an first increased pressure the granted Because to half XXXX. as be $X.X expense continued overall. accounting we of in in

of solid improvement value and return monthly that’s our the of to demand orders quarter showing the X% margin up investments. was as remainder year-over-year a year-over-year minus segments equity absorption we SG&A core million up expansion our after most continued an the of of double-digit the of one-time return home in points about across by sales Our country. our gross backlog optimistic in gross to our growth rate to related on XXXX. end sales the net The our we're as backlog X% XXXX, driven second XXXX at operating operating by and last absorption experienced our for equity year-over-year. months' to our the defined the With value year-over-year for in West grew million, homebuilding Both pretax recorded basis dollar quarter continue see core third margin further strength, XX in $XX gain our of gross markets rate margin margin XXX excluding and XX.X% basis East homebuilding our for increase of rates. increased our points XXX both XX% Because on of $XXX.X margin,

a Colorado in and increased to to quarters market Mountain rate us prior experienced offset increases year-over-year which response cost activity decline gross margins. slower segment due prices to where Our allowed improve in in demand, absorption we

a We appropriate The as between level continue net quarter pace. $XXX,XXX community review ago. only at of maintain from a pricing up on the to objective basis a was the margin the X% quarter, with year an making adjustments price orders our to and same for necessary balance average of routine

the to During prices quarter. about active start that quarter, the in XX% the we were communities of raised

in the offset increases average were percentage a among orders company. of the are price by lowest higher Arizona coming from where net prices our However,

XX% from our for Collection affordable up accounted Additionally, XX% more of new ago. overall a net year Seasons orders,

by The backlog. was average year-over-year, in of homes selling $X.X slightly was an of X% our net quarter homes the orders Landmark the of year-over-year although to increase up additional Cityscapes collection and an at the year. Our in only $XXX,XXX. all in quarter driven ended an primarily XX% value quarter, which that with billion, price in contributed backlog last for estimated up sales XX% was the for We number homes higher X% than for backlog same

driven was Overall of level from relative a operations the our where Florida percentage in mid-Atlantic backlog our in XXXX this $XXX,XXX XXX our peak of lower did investment investment this record XXXX. returns of mid-Atlantic cancellation. was our improved up decrease our so from that second an However, at a end from should home beginning subdivision lower from I might have during subdivision has that more include at decrease to the XX%, indication to in expectations. previously quarter. up at $XXX,XXX I XXX meet accelerating decrease the rate XXXX. of our out of mix Similar a not largest to who end point second was significantly higher a homes have a was our year-over-year primarily first XXX the and and by the our to XXXX to quarter of XXXX, buyers the due recent quarters, the Colorado likelihood were market high the our quarters, cancellations X% of in at however coming average lower of recent of count XX% we X% quarter, in price market. ago disclosed the where end segment, a year see in that due shifted of as gives Active to first-time count level are year-over-year East cancellations we second results the closed X% that a in than us half The of

West both in a two count Utah a segment markets had investment increase result The over segment an community in mostly Mountain in to of and the by active XX%, increase significant Our as due a the Colorado past our market. California grew years. XX%

XXXX. end XXX continue at the XXXX of XX% end subdivision target year-over-year in We to to the at increase active of count least active subdivisions from

XXXX the we state finished the with XX% acquired the West our for lots. XX% which covered we we acquired communities, coming for for Approximately ago. was our from million. for land in an acquisition in total X,XXX quarter lots We Seasons acquired Collection. accounting heaviest million are acquired approved which two-thirds was the segment, quarter, after accounted the of second segment. including for of we the intended quarter of lots in For XX every our Acquisition with a acquired Also total the $XX concentration operate, year acquisitions excited the were communities. the mix first lot West acquired XX% the of during new the the we standpoint, in quarter spend lots, XXXX during product lots in quarter spend XX% development additional these XX costs, second lots second lots. From Lots to quarter a see lots quarter, second X,XXX our Portland from second our for million, $XXX the during $XXX were in market. We of up

the Our lots XX% Seasons or we Collection of XX% approved. affordable controlled end of At lots, these XX% for the of our total up owned other XX,XXX approvals products quarter, new year-over-year. and lot accounted about the represented

end the amount significant quarter percentage of controlled same via at option quarter, ago. year XX% during With of of point the lots from lot the the approvals at increased XX% second XXXX a the the our

design, end our communities start shown the year-over-year comments rose financial liquidity, the to XXX the And at I call By $X.X year-over-year final that the our position XX.X% drive Larry? investments by new of now debt-to-capital to will over before strong to billion. Our points quarter Q&A. in future remains will net the for XX% reflecting our growth. turn back some up end quarter basis we as Larry

Larry Mizel

margins. year-over-year We of Bob. both and of posted laying quarter. revenues extremely our growth by by lot count conclusion, We In income count. pretax future proud for I'm our driven foundation Thanks gross execution to XX%, growth XX%, the increased this increases healthy community

month the industry. by maintaining sheets results improved the achieved these We basis one our equity also core best trailing XX points. while balance return pretax in We XXX on of

out which a year. paid we of addition, share, the dividend XX% In up quarterly prior per is over $X.XX

Our payments XXXX. dividend only providing but that date highest in back to also program consistent the unique yield is not our industry

of results Over improved provide the have better quarters, by we established community. believe consistency is the and and about we last that organization steadily To investment future underappreciated several highlight operating our accomplishments prospects. our a level our additional color in

an Xth host this for we to event success details in and now any continued remarks more decided to sharing have event. on Bob look or We forward have about Denver we a roadmap will take our for in place We now prepared Xth. investor and That November we and efforts our concludes questions. will feel

Operator

Rehaut with from [Operator Instructions] Morgan. Your question Michael comes J.P. first

Your line is open.

Neal Basumullick

the both to of quarter, maybe, get around trended quarter. And any orders there's pick sense kind how my or in demand of of is slow down. this demand for just the month. Basumullick through and question's could, a I Mike. Hi, if guess you I Neal in up if by first sort want

Bob Martin

indicated mixed. the it in in little was I it It last was QX. actually April, faster had on than call a was

up was was bit. then April a down little X% year-over-year. was was about up X% June year-over-year. And May So It about XX% down year-over-year.

Neal Basumullick

of count, in guess, the And year level that back of Okay, looking guess, What's, that some then, anticipated in helps. half. the I implies kind kind at target? confidence I of the for community growth your acceleration

Bob Martin

XX% increase where year. from we a it's Well, the started

QX we At a get there. were do target. end almost XXX that you bit XXX. of starting that but acceleration then that end a XXX, the second you be the some at think to to if between could so the of would QX, decrease We of the the there XXX math at from target do quarter, to So of little and end

logic. the really that's So

Neal Basumullick

it. Appreciate sense. makes Okay,

Bob Martin

Sure, thanks.

Operator

from Stephen comes Your ISI. next with question Evercore Kim

open. is line Your

Stephen Kim

spend. thanks give for my Congratulations Bob, was dollar sense I the if guess results. us could very first Yes, maybe, question good a guys. the land much you on

allocated I well. mentioned think, about lots, I you that as you talked Seasons, the and had You Landmark think had towards

kind give you product curious terms then also, in for accounted for like Just looked a land dollars of can you the a of the lines. And sense which of if sense this could bulk those allocation regionally, us what give for the if regions be may us for quarter. spend

Bob Martin

Sure, sure.

Seasons allocated to talked that remainder we was is remaining Since a the dollar spend really for So $XXX was then spend, about regional that price Then the at you're looking lower for regionally, about. the is to the Seasons product XX% talking right? spent, types. point, that of and dollars it's looking overall million that

Stephen Kim

Yes.

yes. to the way some it, yes. about But Just think ideally, numbers,

Bob Martin

Yes.

about so dollars, think, two-thirds quarter. for weighted West. about that. were up we West this I we're trailing East was about for And same. It in is towards then Yes, well here the that dollars then the and Mountain count, lot as the I said in as actual now. second the had right two-thirds behind you Then pulling coming

Stephen Kim

core allocation, West? was think not regions similar? in now the growth, year-over-year spend within land other terms just kind West, you the Right, bit grew, great. excluding that any Or your actually you've dollar year-over-year, sense way of think sort footprint that the similar? Is markets, expanding – about dollar terms but in of actually little was sort just the would it of we also a of for, geographically think that you territory footprint been increase share give as of And of West Or you to just do of increase about in would there sort also think, there. your or a it to to in dollars, your in you do

Bob Martin

really, $XXX new in way. Portland. mean, it I total quarter. acquisition-wise Well, in would spend that others I West million We West of the about annualized. let one And was the put $XX place me for the about think this have Portland. us is of million that's had the for All

Operator

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

open. Your is line

Peter Galbo

the price down a It's that activity actually kind orders wanted bit saw Pete just bit being some in was full as function raising it into I just down didn't benefit there wondering guys. there. a quarter Thanks as I'm little open given had going back-end Colorado Hey, the John. little Bob, taking and planned slowdown. on communities really into of Mountain, would the deeper a being the kind those permit for of I being the we But get the to absorption of be just of open the in dig for much rebound of being so of that XQ. if mentioned weighted you question. some quarter, and was, the you also to a leading and of kind in you know in

Just be any would helpful. color there

Larry Mizel

I communities year-ago quarter driver limited a of pretty it's I the we happens year amounts results. hard comparable prognosticate really a in year what that significant certainly say to on inventory. to had Yes, And were the really communities mean, in some ago more will this QX. had those

backlog. out the really you So was the in at It's adjusting lowest in thing the in guess we of coming look cancellation new beginning other if ago the I would same abnormally it communities low. company, put are about year to online. X% some quarter, ways, a the there rate is, I

it more overall but as it to increased increased, the company. of I normal, This kind line more something with that mentioned, was in really quarter,

in the of how addition little out throw lay the two bit would of you on to out. to communities I So a information items you giving those specifics

Peter Galbo

you're know trends? it, guys call, are last Got but you willing July on the I doing to this share okay. order And

Bob Martin

X%. mentioned Yes, for X%. June up July, about were we was up I

it's the in the as we So as what about same June. year-over-year increase saw

Operator

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

open. is line Your

Alan Ratner

Hey, guys. Good afternoon. Nice quarter.

just So guess, the monthly here. data order on piggybacking I

sales well something I a sound choppiness, shows of some guess growth six certainly, you've similar, the the July. bullish some some the is on think lot positive other the as and one growth been but I say, in very So as last the and I in several over of it seeing here data, of market, And hand, the over I national from activity. deceleration, you builders housing months, would months seen heard you've we've guess, prior and about which prospects. versus May, at But meaningful a least June your fairly

of do the price my said that from in raised increases, question communities is, I the started rate than have – past? pace just taking all think all, pretty you the XX% up feel growth at were sales up? in so you I seeing putting you think incentivize get when guess, in Have you've so levels back a So perhaps to changed markets you more to you to have you're at you current about the the approach been any pause that quarter, comfortable where Or with previously? you or prices overall,

Bob Martin

decision as Well, on to that as and we pricing, and every decision go. every a it's community, make really, know, we look continue you at week community-by-community

and it's that significant think a increases, of bit you every to that. adjust and seeing with market here. continue price increases, little for our of that a adapt week reviewing normal, experience appropriate. price as But we're to adjust communities of I And we'll discipline the period after

saw per we per level think, is demand. we're of what we a healthy QX community that. in still, think very pace. I So X.X was healthy with pleased very a And month, orders

Alan Ratner

I guess, just second on agree. Got a it, margins. strong thanks It's Yes, level. absolute the Bob. would certainly

the versus I Seasons you you've guess, So and have the you quickly. guys lot said as lot made, roughly brands. it's from affordable currently very purchases higher recent building And acquisition brands Seasons a sales I standpoint, coming other XX%, up great a the looked affordable done clearly, the much what's percentage job at from of and think I a product

move-up? over so, XX% positive given margin, imply level, been we XX%, communities And a are than that better to mix the that the just these so? shift next gravitating year generating XX% think towards should about closer or does at margins the if had that recent that So acquisitions lot

Bob Martin

that Yes, on would Landmark, growing that's that the I whether be product quickly. other see the to more like, our is affordable business. something more of to think slowing And to It's mix because not Cityscapes, say, are we it the XX% XX% back ones love more product, more affordable because shift looks down. or of Seasons

So that be I our It's and matter think certainly could a reality. on efforts. acquisition focus continued a time of

As it's ins far as from the worry with margins the of margins right to all and that predict increases margin I again, traditional now, what a than mentioned, margins, does to hard and product have cost as go outs the we basis. about where standpoint Seasons But on and product. day-to-day everything higher as a does that

be least at should, from we increase the benefits as that our positive in there mix. percentage So Seasons of short term, some

Operator

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

Your open. line is

Nishu Sood

Thanks.

here And On you obviously, anticipated nice the last similar margins, was a – quarter. quarter, upside. to the surprise sorry, you had gross last what or gross the margin delivered to I'm backlog

that You been folks probably contributor to a wasn't big spec, so surprise. have upside deemphasizing the

than you in understand you what to what last higher drivers wanted Just what in drove – of to come margins were the quarter? reported backlog the when

Bob Martin

I where than we quarter was it was houses. verbiage marginally the last used the Yes, higher we closed think

price really, most was that increases generally able there, our backlog then than a And markets. implement the little increases speaking, we is see in QX think, is, So of coming I we've through started with reason that to for the been we from higher margins. margin what bit

is a board. year, the and those some. communities happening I we've And what's increases just shown really, last course, that. There certainly from think the price Over increases cost are across standpoint then no we're increases. of doubt seeing cost also, about then in But increase offsetting those the

has that So expected. previously little dynamic just been a more we than favorable I think bit

Nishu Sood

share, this got were land land you at question curtailing the XXXX, have it, contrarian Larry. targeted market and think in in Got amongst of community you ahead the spend it. builders. I point, the with gaining of terms a slowdown of investment for growth strong housing. kind anticipation of And the the second in highest amongst and count Larry, And

other You're standing out as way. the a contrarian

So you what that a position. I just thoughts, encouraging wanted sense of is take get your seeing you're this to to

Larry Mizel

segments almost of builders growth. the their that in all in balanced been economy really say, have the I'd I strengths. see

maintain them In out at hard are working that, And don't fact, we demand that's most fulfilling their this point, to very the sense growth. of are there. that I

in markets we're focused which are in. We very

two As looks you superior less believe rotated is that spend like than market. of what the a that products in for we almost built to years, affordable I last now in land know, we've XX% home very, very point. price of allow, other well this are personalize in things. their people that affordable in the the homes. market that couple point, unique builders competes to price with We A in our affordable

by to And able that believe staying selections achieve demand unique. demand, something personalization. on have chance focused of fulfill the We and a capacity capacity that to special people are I in there's lot of that have we

very our been have careful We with growth.

actually almost our work homes pre-sold. our know all our includes that work backlog XX% the you process, is As lots under of process those in in and

spend. invite we we to are understands that really lay demonstrates to you out the going November that strength currently been believe I we only very more that X. the the in comment and are we showing as WIP. market careful but demonstrating. event to very the you very, as our not that. also This a strategy, I has are X the land and and So uniqueness Nevertheless, the so are clearly, come being deploy capital now accelerating land our the results deliberate it We're we in

Operator

Research from with Your next Housing Barron Alex question comes Center.

line Your open. is

Alex Barron

guys level good absorption or the how the I entry much Yes, you hoping on rate sales relative to and Seasons communities. was other better thanks pace and little mobile more job. is the could elaborate a bit for communities

Bob Martin

differential Seasons well generally, rate think started some to as think product as seen be But, we've we collapse I speaking we've to that the higher. prices the increase seen Yeah, on I degree. have absorption

Alex Barron

Okay, you are new markets introduced doing in but is in currently, process there where all and the these are markets of haven't are some so. already you it or introducing seasons product

Bob Martin

different in It's levels different places.

in which we just expand in Clearly, it least of got in introduce say markets state, California. it's think not severe place it a a we've all state, Seasons We community harder. Within for our But a trying of in actively in at Irvine, versus going. can Seattle each harder I to every locations. others. put going like to you're extent community at about to topography some markets. I'll are Seasons lot coastal the with in It's example, really a

it those factors we're put markets. do get But of we it. where some to into limit So trying each can of our one

Alex Barron

I guys in then had said that guess, of for. were were think I Washington, D.C. quarters, area, looking seeing the invest. have you you the some in previous those markets type think to Whereas new mentioned you shown, I And not opportunities Okay, returns you

I'm what's your there. the changed curious, in So either of seeing you're in or what market strategy kind

Bob Martin

two we've But capital Yeah, reallocate the turned to in actively well the Florida, have because you're with, like right. other degree. our great markets, for to or to tables A to returns the Mid-Atlantic, from Mid-Atlantic would large a Portland, the weren't some start the I year of Mid-Atlantic. ago, made the simply decision say, the

distinct Landmark changes But to all that used shifted recently operating making have Familiar performance we've the Maryland, If to of just really in strategy we much tweaked we in that you Instead in be confidence Mid-Atlantic. all year-over-year. of really Mid-Atlantic. it as the and to got product has two themes. look that to at want seen it's market it at we we've the absorption better Seasons market. now And at operating a those continue given Virginia what our We've us rate, after in. margins, we Mid-Atlantic, operate and offices

Operator

Buck next James. Raymond comes Your from question with Horne

is line open. Your

Buck Horne

maybe traditional as is, line at do Seasons now mean is expectations. forward? wanted Seasons product little that a not company Seasons your much to you that that line quantify performing sustainable on differential understanding there bit and your the afternoon. split And the it's your average, the extent that so But or it's what Hey, the going And product. well, maybe would deeper product better margin or think or understanding thanks. for go room I of, either well? between us into improvement the is curious than right Good you just to for is can traditional

Bob Martin

as room is on there well. think I improvement for Yeah, traditional

I in across think seeing lines. product we're margin improvement

margins, to things So higher these it's if and not the give this product. the back don't Seasons some XX points. We price specifics goes that's that It's the Seasons. there's not basis the on the just meaning percentages, but guess, it point. notably the of demand a offsets It's go I notably more time, over land we've the whether just out traditional limited specific higher. and other up than not maybe to products, is or of have for tendency to that seen margin differential affordable mean, towards sustainable,

now, So is the it's how for a tell having that meaningfully in tough But future. to it plays impact. really out positive

Buck Horne

you all or range guys Okay, the that's help at inflation, maybe to inflation at you us seeing you're And you of for some maybe moment? rising rate, least the adjusted helpful to quantify kind give pace? cost and and have color. bricks absorb us at moderating sellers Can land the cost having a absorption are hard I or what think but it, sticks mentioned

Bob Martin

say XX% on square Roughly and I would year-over-year basis. about per increase in that's costs Yeah, foot our speaking, year-over-year, direct a

they're this I seeing look sellers, It's capitulating don't all. don't think you of little land think As land through to cost a prices far at maybe I I if go down at went what year-over-year. bit up don't, as our sales point. we're really at flat

Operator

comes with from Kenneth KeyBanc. Your next question Zener

is Your line open.

Kenneth Zener

is first Day. My morning. Analyst world pace, look And look terms it pace. good order of I in the at Gentlemen We to your the sequentially dropped. forward question

in orders. So Yet sequentiality of dramatically X%. Normally, sequentially. you in well, did very the the increased XX% it’s dropped, normal guys pleased XQ, to it have XQ,

a if reason in set that way but little the the XQ? to up I really just difficult want realize I did you – see in is market you're think I bit in question terms guys sequentially, read. the XQ, to pace, you kind outperformed of you given how much it was So year-over-year order it's Or up of weakening

exceptional Was is So change fourth was for that in what been something mix? just an it could of pace? pace? had you Or in comment sequential kind quarter pickup coming community there else it on off that

Bob Martin

fact think great company. the talking sequentially. mean, about at it mean, I for on I don’t hit it you that's and head up, look we're a Yeah, it's I growing year-over-year, on the lumpy you we And But have us, have a rule, even because XQ focused you're to and didn't out relative time. could any seasonality hard fast though QX. over be then it right, generalities to it's hard can throw

kind think in all in healthy that itself, stands reasons what for Larry's we out and demand Larry press my of really release our is that the think I about. comments there's numbers for talked So have the comments we and

Kenneth Zener

step are obviously, us familiar I – is Larry, If guys you could a take market Denver back. guys a you with. have very

the what at did. if we time. been it's markets, struggling existing So like last it's inventory with be but is it you to contracting starting months least, – see I've first or select look And for rising few happen, not the

seeing declines along So actually space. that new in kind existing sales rising of with we're inventory,

kind how with rather So, experiencing, is rising market it's about you that in you to can much. how of new you happened guys about mean, than you're there just a Denver? way home guys that the interacts you talk think very existing national? sales Thank inventory I

Bob Martin

one I is low a some observation still think, markets, it's about though pretty some just at really, in increases even our our in see guess level, every might of markets. we I

that still supply/demand dynamic that So to is like see really we the in market. there

orders us there on gives going seasonality out or quarter-to-quarter is you're a there's volatility our a some concern. nothing where big to basis. go with now right But what again, So inventories the have that on

Operator

Your Instructions] ISI. next Stephen Evercore with [Operator question from Kim comes

Your line open. is

Stephen Kim

guys. much very thanks Yeah,

here. to a Just follow-up wanted have

a it take what not, to of you makes term? do kind I you have wanted Buck a gross period into you of bit. I Seasons And place? at Seasons on talking move-up ask level. higher margin. little the if sense a the of that transition Do to just Sort time think delved long the of sort for over higher might think gross know than And higher a having sort margin

Bob Martin

second the on know I part, idea. Well, the answer is I have no

just it reason we're the the And the you're my increase seems have And time. conceptually, part, because really first has that for little some on underserved It better margin than think prices bit it the like reversion the for goes back segment period a to seeing point. product been kind converge serving part of a of I of Seasons to would at we market able to On is the long for we've that more product been traditional product. mean.

So that to it. dynamic I think there's

Stephen Kim

that sense. guess, I Yes, Certainly. makes

entry gross while just to started higher. after reflecting obviously, mentioned, builders a was thinking back when lower was been just the the you ago, it of of going initial fact underwriting about the go that I And that margin. the the on was have level all So forces a and sort because to it they've

to naturally make from nothing just we normalize, that once a – And assume. perspective, I things so I I there's mean, theoretical that margin, about gross inherent wanted higher to it that shouldn't sure would makes Seasons continue

Bob Martin

And to only that distinguishes really I would it, mentioned Larry built-to-order that Seasons point, thing still. Steve, is it product, that the and say the is

competition Home nicer. products our think the at relative to our it is Galleries. a little We bit customize can You just

a think I appeal but first-time So to also to not a that move-down buyer. buyer, does only

the get you Seasons little extra that because think play from a bit I of dynamic. of so And

part. just wanted I that to So add

Operator

time. will are the to back There now presenters. I turn this at further over no questions the call

Bob Martin

you the reporting we third today of results. our the look everyone we you, and forward to on following appreciate Thank call being again speaking with quarter

Operator

conference today's call. concludes This

now may You disconnect.

M.D.C. (MDC) 1 Aug 182018 Q2 Earnings call transcript