MDC - Earnings call transcript Q2 2022

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Operator

Good day and welcome to M.D.C Holdings 2022 Second Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I now would like to turn the conference over to Derek Kimmerle, Vice President and Corporate Controller. ahead. go Please

Derek Kimmerle

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

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

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

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

Larry Mizel

Thank joining you us today. for

go of over of to current share the discuss XXX XX% business Home quarter the per second XX.X%. of company, reported earnings XXXX a quarter diluted gross an we and second As the for the to our improved outlook update MDC points provide $X.XX results for on second XXXX conditions margin increase representing year in XXXX. over for year over basis sales quarter quarter of

our our sales average the job delay, overcoming stated and excellent what in price operating difficult team did has of homes end delivering guidance high deliveries home quarter, construction and the New previously a at environment. an as came for more become in

as a great a quarter $X.X We operating XXXX. enter profits half also strong position second billion, of solid revenues the we deliver and ended putting worth results operating to with back for with the over extremely We're us and pleased to financial quarter. continue backlog in our the

we Our and order in short more as slowdown progress. quarter around expectations. see a the Beginning which our results pronounced became began mid-May, traffic order of to activity, fell

confident negatively backlog sharp a were at this persist believe purchase. buyers cancellations higher the buyers shift economy, impacted unwilling the demand of and number were buyer negative and results as our of macro In order for sentiment surrounding in the and overcome an quarter, their reaction We increase to addition, headwinds rise inflation, increasingly mortgage uncertainty to in for unable sense is overall our net with forward difficult or headwinds Surging the have Despite least exist, a will was rates. will demand damper both adjust buyers in to that that in in we this as and outlook become our move home new either the including these our health which year, reality. a natural relocating remain population long-term cost trends put continue high propel industry lifestyles, last the on years few adjust a areas to believe and the including and years, the country. our large boomers We builders to company. baby near-term low results, a over of from of our their drivers prime remainder likely of to Millennials industry order for migration challenges, that to the home entering buying these their

while home while focus have continue geographic rise. many markets and new our our they over to recent the below well existing In and long-term. historic industry a from we both to positioned inventories, is increase product to affordable trends in Thanks MDC levels, addition, rent well remain benefit these seen in exposure.

some are markets strong favorable the attractive incomes. ratios, rising job in employment and bases, to the Our homebuilding with permit most in homebuilding operations of country

We Richmond point. These that some have target and of several home quality are last price known scaled years spent in features the retooling well market, and but offerings for, broader to are of to craftsmanship buyers. homes new American affordability concerns and pool the footprint our located at areas address the of and our Homes a a markets, down in

is believe advantage many the of broader the our markets, right right gives forces being our that type of that over the competitors. long-term over immune and market us to a affect to results will in While no builder better product currently the distinct industry, lead we

$X.XX and cash XX%. unsecured sheet, our low of cash stood billion The period equivalents net a million facility. debt-to-capital at company stay the our built from model times. to adhere a business $X.XX land debt-to-capital just should order of advantage speculative giving We've and limit our current liquidity operate opportunities ratio not XX% of amount potentially our our of of ratio well communities. certainty the the of We strength at the credit to with With us in a in entirety quarter of under disciplined leverage uncertainty. strategic nature a profile, ample quarter run we new market the cycle, of our to and the and balance arise. revolving position housing and allows we're entered to deals, company during total well end available successful is can has of in This be a and through positioned the take which our level inventory $XXX billion acquisition Another of means capitalized they good advantage liquidity and in this of always with the

strengths of us our may We the on price While leading turn peaks, to the during per limits upside management some seasoned team consider should recent space. this quarter. discipline will long-term factors and of performance that, experience the believe of pay industry David, along curtail over when sheet, market evaluating in it on troughs. balance call our equates to during this of an I'd investment are with the basis, detail an to operational who It to yield the annualized homebuilding attributes provide dividend the our share based more market on like levels. which With $X exposure X.X% a the investors allows our an these

David Mandarich

us Thank thanks the everyone for today. joining you, And call on Larry. to

which of widespread. a across order second as The slowdown XXXX by marked fairly execution was by profitability quarter activity, in great and as platform, our was well homebuilding strong

days previously year's the by New basis. than wide was supply home total. our company our chain stated for lower continues a which midpoint guidance, deliveries X,XXX on of be cycle quarter, in time But five the challenged environment last increased to sequential came above the at as X%

see trades, of some of front which availability starting particularly provide will are the However, we the some improvement process, on of relief. to end the labor construction and hopefully

homebuilding of price to in quarters. we Our Riverside, regions XX% keep Each in California. the California able posted profit home have of over excess margins pricing been based XX%, costs included several input gross Phoenix, profile as sales our quarter, gross increases Divisions the our with and nature highlighting the the gross margin broad of rising of approached Southern power. ahead last highest

which the in the we As Mountain through of Larry resilient and of On in carried slowdown absorption phase a starting X.X quarter began mentioned, X.X, April. East them for activity West Buying fairly absorption the has June and been X.X quarter. X.X. order resulting activity phase first a mid-May, posted region an regional into into experiencing basis, the the around

in confirm a as generate believe about that much would actions, so. that is the also in should expect place the negative months the of and of were we profits backlog homebuyers sentiment take which were However, order of increase a cancellations, net in interest to to higher scheduled close homebuyer good coming a the began to better some do that be of result from This to an revenue on proactive be our backlog during feel and closings. the our noted and to results. It combination to lower impacted confidence consumer quality these led these result a the cancellations further in quarter. able efforts rates toll of We

efforts the we While good to we new adapt result are in net are our reality. the believe order disappointed for sales to we and a the with position quarter, adjust

very have discounting, standing little would the build to end to inventory at of heavy quarter thanks the susceptible business that order be model. We our

lowering some our should higher it tools offset payments, We at monthly several mortgage disposal, incentive as financing to have particularly buyers also relates rate. and a impact which of

focused us on gives still gross more efforts to post the healthy Fortunately, profits. margin be our profit our sales ability profile and

adapt located that market ability product along to advantage about these to feel well we positives, having Given with new good communities, with and natural environment. the comes our the

the on over for to will who quarter. results it turn to like the I'd more detail Bob, provide Now

Robert Martin

David Thanks, and morning, everyone. good

we which of XXX margin increase XX% This During a operations quarter, $X.XX second million, Pre-tax sales, rose diluted the revenues, from from to points income or XX.X% homesale $XXX.X share, our by to basis quarter of from as driven which income per second billion. net X% well XXXX XXXX. our representing from XX% second home year-over-year $XX.X by as increase $XXX.X million, homebuilding million. the gross generated $X.XX was increased quarter to of or the improved

operations, increased the This was XXXX Our financial to due which to $XX.X revenue within of slightly captive companies. income pre-tax premium increase insurance second from million. services our primarily our increased quarter insurance benefited during

quarter. from to the interest lock homebuyers in by rate commitments, and for lock had with did rate increased competition a opportunities, pull While rate many our these forward mortgage lock on operation increase the mortgage commitments be of to accounting in treatment impacted long-term primary it take electing market, income programs. in effect continued advantage The benefit pre-tax buydown favorable an interest

in and equity increases homes the which exceeded but the rate tax XX.X% was X,XXX the during quarter been the second our The XX% the $XXX,XXX. increased not closings. quarter, range quarter XXXX credits, for closings to midpoint result the primarily XXXX federal quarter average upon of estimated rate to California increase energy tax the represented in X,XXX shift implemented the of year-over-year, efficient of the about selling by increased decrease a delivered vesting during a two and the to decrease from which past awards. windfalls primarily due from to a quarter, over to the was delivered extended to the Florida. XX.X% price X% previously We offset during the and recognized years, was X,XXX our Our of price in have home partially exercise mix This of for of homes

cycle below for norms, rate backlog Our remained as quarter. months in those historical XX reached time that the average conversion second our close well closed homes sale nearly to

at costs. economic increased currently frame implemented gross did margin the conditions XX% and labor in home each we should reaffirming under we to for second currently status the the half stage We we quarter, that for forecast we guidance deliveries at construction units second the segments expect and in underperformance East selling be end in largest are of of backlog the our segments, end enough XXX X,XXX due have all between XXXX, increase. we the heightened backlog just and continue price We labor price and improved with last relative construction XX% chain meet productions, shared the this of supply current the time average at homes our West these the to our in $XXX,XXX Note improved full-year prior-year. and not for deliveries half compared to year from risk home margin increases of and quarter, of industry $XXX,XXX. driven year-over-year this units volatility XXXX of during the reflect the X,XXX also of which While of communities delivery experienced the of improvements increased deliveries of by volatility. year-over-year XX.X%. conditions having material second the range quarter of to deliveries anticipate the There because our increased a is home with or first These been units, across construction of to offset to benefit the the between third beyond of basis quarter of as second were the by building sales of that nearly have sales of points by quarter. partially across XXXX our our quarter Gross and

While gross a from in homes peak of of a have in result and as healthy. their higher the margin decreased year remains this slightly backlog lumber sales incentives. They earlier up tick costs

As a we assuming or are XX.X% the for between and result, home margin of XX.X% gross no currently third from expecting quarter warranty sales impairments XXXX adjustments.

driven increased from by SG&A XXXX general second Our $X second quarter expenses. expense increased for the administrative quarter XXXX dollar total and million the

resulted leverage. we revenues drive operating average prior-year and our of as $XX.X XXXX primarily administrative stock salary to as million. from administrative based third be million basis continue as increase sale expenses estimate This decreased an increased million. the general as expenses related currently year-over-year SG&A expenses $XX X.X% for will increased increase from accruals. Our headcount, the due home We of to expense that quarter to overall XX in to approximately deferred points higher General improved quarter compensation well a and $XX.X percentage

more XX% a in to an decreased average by and open spend in percentage resulting our continue coming decrease our drive to traffic due point in our which these are basis marketing price in and year-over-year, Marketing our sales in selling both was increase a XX% dollar of in sale communities as XX decreased net Our marketing year-over-year a value costs improvement trend to to centers. $XXX.X a orders to quarters higher million slightly revenues. increase likely to of as to The units commission we new expenses offset effort $XXX,XXX. home expenses XX%

and don't pace homes a decrease increase the the slowdown year-over-year. keep from see the XX% backdrop rates, in borrowing second in Our quarter year-over-year the decrease, community a Well, occurred of against nearly quarter first beginning was the like higher the to prices the during beginning gross per month, X.X we quarter. absorption a represented of both our per which that of mind home XX% to

beginning Cancellations increased to second community and in continue X.X% quarter quarter where of incentives on the percentage a XXXX. We and a to X.X% XXXX monitor by from adjustments as closely community necessary. the basis of second pricing make backlog in of

this quarterly in new our While levels seems of two low the of the increase were the the context from to historically incentives during saw the orders We large pandemic above prior-year, the historical years. cancellation rates past on increased XX%. prior quarter consistently

drive these near-term. address rate strengthen to In help addition, interest lock continue and programs utilized to tools affordability rate buydown and concerns we the quarter to use during the in orders we'll backlog and

our XX% by segment from and year-over-year with East Our both active decreases. driven subdivision West the to was year-ago. This increase count entirely quarter, was up segments end experiencing XXX our at XXX a Mountain

count, in a net year-over-year total XX California Nevada saw increase largest Our adding communities. community new and of active markets

XX% approved million April, for total lots We we just acquisition XXXX. million in the the during $XXX active We as quarter double-digit the second from to acquisition $XXX at count of increase community quarter the through second December we XXXX percentage discussed count to active down during in call, the of slowed the length community during market have December activity expect this in land in spend land we mostly the remainder XXXX. we X,XXX of our year. resulting pace to continue quarter. our continue from growth during And our XXX XX, of forecast to XX, uncertainty quarter, Due XXXX lots acquired to

We XXXX diligence, projects development level product modestly stages at during from We forward million during of to current of decided land $XXX of incurred million we year. up the quarter, various last spend uncertainty. also $XXX industry add the due number of second quarter abandonment a the in quarter move as the of same charges not with given million $XX.X

XX,XXX of supply away As year-over-year lot from decreased lots. to saw projects, we stepping X% controlled a these result a

supply of meet three operating land. philosophy sufficient still years, this maintaining consistent believe our we two However, a for needs to of to with is supply our several year

we currently had of in credit X,XXX option. at letters deposits, As risk the $XX $XX.X in quarter-end, million under associated with of million cash and lots

in lower we Larry ended and total the As cancellation the only operating months of six our With result ended speculative as the of XX to first homes. saw as for billion position, senior $XX $X.X $XXX did period only cash highlighted, this Well, unsold quarter, a strong inventory jumped six XXXX we with with flow we note the year, million XXXX. quarter maturities we land increase in months see financial liquidity with during activity compared the acquisition completed of of activity no until first overall XXXX. for million

has homes recently operating position of flow pleased Our revenues cash pursue we us the as may or uncertainty In better deliver picture believe to the summary, there and economic in half focus remain be remains better persists, been our for of and we sale the If and new profits pricing the XXXX especially an believe second in first home our strong available. with will us, than to market a half are backlog financial position in results currently unclear. and opportunities key that for the terms with year. acquisition opportunity

arise. remarks. strong the leadership and headwinds, approach us concludes That market allow rise While rates the to to prepared operating other uncertainties, disciplined given we in rapid they market continue to are successfully experience our will seasoned balance challenges likely business and to continue interest to as our navigate sheet,

questions. line up We open will for now the

Operator

Thank you.

Evercore comes go session. ahead. first Instructions] Today's [Operator question ISI. with Stephen Kim now Please will the from We question-and-answer begin

Stephen Kim

color Appreciate the very much Yes, all detail. guys. and thanks

wondering First the pointed basically obviously you the related When question it sense as It high cleaning I backlog, were it was those was could collect And to percentage this if your little Last if due a there And as if earnest sort of kind was price the of earnest on also was to that something out, had sales relative of cancellations. give why was you cancellations. contracts on about a the vintage and to amount your you X%. of initially we to there. some is buyers for low your quarter part, you if said quantify of generally, from deposits a maybe to say I I you signed was not, maybe plans the any maybe side, your was there us was that, increase wondering money of of peers. the not? bit calculated

David Mandarich

Steve this a of good answer couple I'll morning, Dave, is questions.

talk I think what entire that is that have the maybe we a uncertainty, some if think with to people I or we'll locked we've with that, on to And got Bob figure is also either our decided the And went that if program, is out about make entire lock. or addition a said, through on figure lot had forward, did additional edge, that sheet. can somebody current in very won't our lock what earnest them all our in in loan let's we in how much X% cancel how or at we wanted gallery that addition we to to to pretty and a program. balance earnest were backlog put for were extended of But take money, somebody we go sure them money this two mortgage we out these proactive on said we with and our hey, houses.

can could sure bit then And and cans, if little had to make them a tell so about then sell that to we we aging. over Bob move more probably a we them. were you spec very proactive

Robert Martin

for Yes, it's so were I within of the prior. majority homes think three sold cancellations our that months

that closer just really good rates, than the saw construction February, within made was came backlog the as which some again some I wise, XX a closing. for important shift But our that didn't that to so weren't there sense have some it who But cleaning sale point and relates the through clean. were went So rates went have we of say number, deal consumers really that the with think building out early months especially fallout it's in through that want kind in to it we sales don't mostly a sure pretty specific consumers now. phases, of March, chance there that. for big I I were for and and don't extra to sure who'd days makes extra in we houses would and to then carefully it We And always significantly rather are a guess backlog you of in make consumers there ultimately be have those go good quantify that just when important and the backlog. of our changing, further

part our obviously, I process. think rates. And of normal it's in because of a just higher, cancellation shift the are rates

July, only like going than So is lot far that's did. like June looking cancellations we're it looks bit lower But a Overall, July to a month. in June. have one overall little

Stephen Kim

process. prices that's year's your Yes, half a thanks decided that talked opposed And many out. takes for little of there? your that maybe just from renegotiate it to walked that July, instead walking drop and sort you to talk walk like price away later, terms than the it's us renegotiate second our effectively I a terms it relatively worth. By things sellers options that you through to in while color if away noticed But a walk process at to this cutting to just count, was you you that your could pan why of related you thought opted we calculation, curious with tends option will believe why point just land kind anticipate from our market don't land would generally you you terms of question as bunch I I that options, extending If so opposed about soon. a away because be it less as and would land land away and while a to for, if you lock to ask on Could seem understanding Okay. away would helpful. as wanted to takes then walk sticky, the the the

David Mandarich

or land Yes, transaction, down, we Dave where price. happen, sellers seen point, went every go were and looked over a the and this it And we through think what is on things the a Steve, the seen it's going at get we've was, that it we extensions negotiating kind did that again. a of is of of more what prices that, of was now, the last these lot unflexible go tendency certainly is to talking where have softer. that in one terms XX are lot seeing are hey in And things reduction we've I the at to when Actually market. we're maybe years to sellers a little going to prices either down

be the thing was decided prudent for objective. we So most do to us today

add ones have want have earnest money to to and some current deals where these renegotiate the do find due at that? these, move the and to do and diligence sellers. the and Bob, really them don't point, give look say, some you cost or reduction other Let's forward we'll we at do just hey, with what we

Robert Martin

you the QX, others And we takedown the I got where coming. make we pushed renegotiation had out, a some there But Yes, rate end instances like there was there's said, on on decision. increase. kind is were In deals. the of front where at are of to think the factor, stickiness locks certain some

in So, deal the or of not trajectory sellers prices, of all of our lock the flow. way terms sells same

indicated, see some made potentially. And in of capitulation, terms quarters David I in on I more as we'll we pricing coming decisions. think, think So

Stephen Kim

takedown that it, your Got would some with, helpful. are got was other say it. immediate would maybe in lean be I builders. it land to overall because and of to more most just rather be have that, you That to subject might holdings what options fair really terms mean, begin

if a Is that's wouldn't And reacted pressure. you lot did. fair land, be a may more way say, that characterization? the so than why had same Whereas, feel let's guys you you of others you that

Robert Martin

answer differently, know we with what looked as probably little can supply. you we've it listen, always I way had said, short the land I a at very I a Steve, we think call

our two take So when absorptions, at or terms future, forward. we some and get in or forward, the in coming and this going some said, we'll be change way a in three, just pricing absorptions think better what going think we quarter, at softer the looked land look might next of let's maybe we the we

balance of based now now stick two move just have sheet let's to say, put So our absorption. on current right hey, our of on just or years and to going we're and knitting, kind three land

Stephen Kim

great. Okay, very much, Thanks guys.

Operator

And today with our next ahead. question comes from Raghavan Deepa Wells Fargo. go Please

Deepa Raghavan

the but you can of Thanks absorption in Can in talk some portfolio, gave negatively market pieces, volume pricing? surprised you dynamics talk some terms about you of question. for of you that your about everyone. markets taking good or afternoon, positively my Hi, the us or

Robert Martin

there. would immune other saw a It's on out in namely on the I they're Florida, not that with there, markets of from think we're say affordable the our rates, resilience they've and Orlando Jacksonville start and some factors. guess I because I Yes, there East some we out going Coast but great part more in to and in affordability what's with factor part become operations, climate significant of I guess

late. that's think of really as good I one that's So for us been

Deepa Raghavan

and regards commissions, levels? Thank through with of levels, two there. those probably incentives more bit, those the July you you marketing commissions, that. What's as incentive, a far said question, pre-COVID July this your time you. can are largely pre-COVID pretty advertising, part is your, marketing more little lower. looking driving June at you through you spend, time, slightly putting the like taking it that you're are spend, part said off what talked of to from talk same to point we parts Okay, but in about as are -- And where at lower cancellations cancellations back same you incentives, Or the still the higher

Robert Martin

keeping there have Yes, we so they'd though tell to would it's couple say, and HMC. to not worth to of our serious look make or didn't we was David out taking somebody I that to I make hard of to at the some as tried indicated, cancelation, and to judgment, of were finish visibility a say, be able one able point lender, relationship things, make terms line, ourselves only line, with sure in who it's guess a QX, great I we the think just month our always would it we in really to finish our under backlog that, wasn't given data,

that's beyond overall, up that thing, through to spiked back big And would what, spike the five, settled of tenure roller a one pretty have that, mortgage that same three, now we rates, correlated sort and So up rates interest I it's with mortgage coaster. had say gone down. in rates

a So up rates But abated it's kind very little at have a that at have that initial of just to stabilized little shock say least, to bit. early this seems point. the

settling moving speculation little they down what that coming of might hey, forward. huge and it's the spike see up it that part. something consumer little just bit, says, a do comfortable really feel a the a my months. kind it, that's in bit have more to But So now with that We'll happens I on missed

Deepa Raghavan

spend your with On levels? pre-COVID commission the where part incentive versus are marketing you

Robert Martin

because or that contract, Derek advertise to could But for high very part. reminding side. David, part were the it people doing course just question. I of demand, sales on mean, that were forthright to year thanks a it for getting level call, bit. forgot stands that marketing over would the marketing past the we're signing offices to like little or much making on indicated and having just We we expect do our More somebody seen up sure not I by was Larry, we're this come we've maybe really as me. say, spoiled reason. And a about of as I the more so. a very six

what Richmond see sales the continue needed find We're evaluate out specific a have don't there. see offices is just make our and see end But additional I sure we'll before the of So, first front they and can people number. that. others that to to on market

incentive On the a ticked up the we little quarter, side, bit. for

second just sales. in were about in think X.X% on we the quarter, the just I new X% quarter. we're prior above that's And

about not So about basis it as the in of guess this at movement XXX points well, commissions point. to there call changes huge commissions

think that's little a stickier. I been

you looking not there at out competitive yet. competitors that outside sure to whole make with lot there we're brokers but were movement are of Of doing a what our course,

Deepa Raghavan

for That's the helpful. Good very luck. Thanks color.

Robert Martin

Thank you.

Operator

from Wolfe Please of comes question Patterson Truman our ahead. Research. And go next

Truman Patterson

anymore? your the I X,XXX Metros good remainder these and Hey not follow-up certain sharpening taking also from or of the you the about deals imagine that really criteria geography option any everyone. I of was that for that away to magnitude Thanks walkaways, underwriting for remain, and to for Stephen's could lots questions. closer my lot wanted the quantify there your a projects pencil deposit might on afternoon, chance all question prior that option hitting you're you be stepped

David Mandarich

mean that looked just of go I think don't company. then were the we've I start markets, we of is a absorptions in for substantially. go that thought all decided entire a at down words. options what Why our I of couple we say going out and And to couple

our thought long. the we what, little go of as looked entered kind land of absorption were the we here So we at pipeline, if down substantially, sit that our to when going maybe lots is we option

of decided on case, a of kind couple you markets. can that a on, little Bob to in so color move And give we maybe

Robert Martin

Yes, you think the it all and of at not most, probably write-offs see all. about, I did the about will had if part we due see than I David. similar to very asking describe I it everyone how I I level And to looking see away, it's higher those question, But in expect But some that's or were you're have you continue imagine every quarter, second more at And to just think don't a remain of as really, looking future? what hard. markets, mean, to I percentage I would we see elevated, it would we're I pretty would imagine you in to X,XXX of your the more of of specific kind going going bit sort a lots. normally bit outright a I deposits. whether some think diligence typically you it, a at just costs of walk mean, have

Truman Patterson

But David, of brought about Larry, couple And have price But okay. and here. down through it's a up kind of then, And question first part a multiple declines. the cycles. Okay, going early will and we're two been cycle, through you you land for potential right all times right clearly now. now a

experience. you that Just two, way, trying that in past market current just view compared XX the hoping conditions, to months, then how on the to understand based next just over all And part in we'll bumping it help first relative all incentive quarter in can or kind orders, levels orders? June to up been the you us incentives of call quantify July, have you into

David Mandarich

But land one, tell clearly up, two. things that softer. don't down five, the a cycle what let today getting go these of bit, little know see experienced number and more. are And I take, past, can take Bob prices down we many I bit I'll question may the which you experience on they we've will I'll and speaking, I do start our are softening going But [indiscernible] cycles. generally when I'll past, in a think six, little terms that

what's let let's of So for of lots let's of see hey, in period abundance timeout, got the and the you're will we next prices That's definitely in call can I terms and some land up, their Bob terrific antennas the think in I as an team all going use we've timeout, have are on management that us time, on. definitely see enough said, think caution, all down answer definitely we so short one. that people We our other going one. getting markets term softer. I the got

Robert Martin

where don't saw into stuff. we're you June, want higher And for sales to the of the going And I be monthly Because parse too gross that to that. don't much we're QX, about QX, X.X% market. so I longer-term. part we know that to adjust Yes, sales. X% bumped incentives, X% bit little than continue at X.X%. for to shift. about of up on we'll to that's to But really indicative

Truman Patterson

clarity, And for Okay, is for that kinds of okay. orders, Perfect. correct?

Robert Martin

Yes, gross orders.

Truman Patterson

guys. the Thanks, in quarters. Good luck perfect. Okay, upcoming

Robert Martin

Thank you.

Operator

go from comes Associates. Please ahead. And our Alan next today with Zelman Ratner question and

Alan Ratner

Good guess guys. taking on afternoon. first Hey my Thanks question. I the for cancellation topic.

I them to or more be didn't maybe rate for truly that it keep able at think a were proactive? obviously to regardless least but financially June, And or saw it it kind going decided you reason like some what could everybody you cancellations might these whether make bit pickup of just guys what And that sense about if loan. you either sounds the you yours being think you bit another something have down you buy cancellations, was of that or qualify more were of buyers a at that in seems you industry them? to As if not one of buyers move was than incentives others. a of have forward a estimate been are to like in for kind percentage have saved those that perhaps the kind increase throw that

David Mandarich

I will your answer question. part of

program? said, also. always little those give in went a a people team have on, qualify, we we mortgage look that can every fit. of color. was And moving number hey, and you our maybe possible, that we hey, of Or through we Bob cancellation had when it so did a say, couldn't have can just down? But mortgage you more can we to might They that another some put change think I you and just got of buy circumstances

Robert Martin

up a cancellations to said a of psychological we saw of we maybe kind remorse, the Yes, well, other tick call of I what percentage more in of way, reason. think an in the related just kind

to to and having qualifying frame time rates and talk the being because addition higher, just given you right just rates too impacted, just being they maybe being harder locking seemed financially at the So it of in like that, and interest volatility in high. consumers, of a weren't mind, worried

heard didn't I consumers and proceed back rates want forward. come said, a down. lock and I I think well, to And of think number going away, to are just right who we from

a element consumer psychological of the a just say, willing that part move which maybe been, bigger year-ago. of than cancellations that kind to So wasn't forward, by the was it's

Alan Ratner

Got it, that, that's Appreciate Bob helpful okay, Dave. and color.

respond how a look peers I earlier number to the some in Second, covering your think you of responded I guys here, markets sound guys or a it that to if back I XXXX, quarter of maybe yet, a to from up kind recognize changing walking backlog see before then I cleaning of away doesn't your your multi-year purging I when like on were this similarities of diligently here. you front downturn I that, builders of company comments, on of the back just to the listen lot early know and the pretty options, one you're exited started first to If did, downturn. anticipating us in market at think you definitely

and little you've that markets They Boise bit XX are I how talk standpoint. the think number much pressure a pricing months? over markets absorption or today and the ones Austin So just we're from how sense, and makes thinking of entered hearing price of can are it mean, can Nashville, most a XX a given those probably a some like there's about been kind you newer you're under some the about appreciation and of last of maybe I there.

the some So, can trend few expect maybe current this kind are quarters we markets? you of to if persists for pruning well, committed as still another or of footprint those

David Mandarich

us time. you all, of a followed long for First

very And that careful. very, you we're know so

we really new I markets think in started we the started small.

by years I think what call markets. you we the one of us things others. I But when and think absorptions about, two at you I think we're think and Okay, we looking finished overall, I phenomenal just about of land, think liked have really the is

call going think like it easy see don't lot on could don't peaky of in I happening Bob, it see things lot that 'XX mortgages. A we mortgage. a to forward, is we get So of see and what and were 'XX we no 'XX, and where headwinds it, I a Larry

to markets, the demand add the do want we to differently it. a there's a we markets, going less what deal be think lot We still do, that? have to what forward or lot see think we absorption we for to is and so today. of you Bob, going And just with

Robert Martin

work, markets, I we markets. we not liquidity the in new opportunity might to originally the of be Even deals like work and sheet, a balance just that our that markets. Yes, great some to we've we great any for think would thought got those other in reason, a got But have of reinvest successful greater continue to anymore.

So think opportunity move we've to at an going objectively. if success look forward. I got it have of But to we we're those pipelines, retooling

working certainly and afraid not if we're it quickly. just take not multiple just we'd markets. indicated, decision to make And the a long our quarters, we at look acquisitions standing out a you over markets at As look like take

Alan Ratner

warning risk I signs really a and on just you're like seeing of fit None and markets bow of appreciate the reward? put of the thought you where those to at kind point that this. the the this kind description outweighs feel

Robert Martin

go the long think about model evaluate we on is business Well, great I the things our think one that's day. we land. markets every all all And I the of time don't

not long think land. go build more our on kind markets. order of and new we're going that strategy order market, to works in really and seeing successes building we're And Okay we some these

Alan Ratner

it. appreciate I lot. a Thanks great. Okay,

Operator

question next our with ahead. Wedbush. go Please McCanless from And comes Jay today

Jay McCanless

actually point? then take entry next maybe anything remind what focus in did on this change now? Alan's with says maybe Hey, go-to-market us you questions, or thanks at your seeing what, if your level you are And have a right now percentages taking less for level that right product to that level out my entry just also, question the little

David Mandarich

$XXX,XXX I start, terrific product, percentage we we have, I'll range pricing, way with product. the little we kind one in level building every on with all the around the Bay David, we're the about the and that one affordability order all flex is is called a depending of a you think is entry the that a on at in does then just seasons the building And Florida, great, it we're market the really we from And would our and in Bob think have that we things the of kind range right and are of on in I seasons. give now. say things or that it's think great. market, essentially But Jay, in it's the bit of same we grand California, XXX

a we is you've And couple we're good. in so just we the got think that of percentages, is and do through in -- in, essentially seasons. go pretty fact, that darn market Rob, all will Orlando, product got some but Bob we've every And markets percentages. we it like

Robert Martin

includes of Yes, our was our did metrics. on about for the past which offering, net of we as couple of quarters, two-thirds affordable seasons what what we sales, kind view sales

that's Just a seasons XX%. little bit, was alone, sales it year-ago our And was about up QX. in even XX% of

different just first-time to build And ability that higher categories. has flex like make to we different can features, cater to buyer, what So a it just I David seasons feel some a and that, types didn't nicer order is it it that do finishes, it put of to necessarily it to appeal things fact still to that And mentioned the that resonate. of makes continues think ceilings, you consumers. nicer, nice that part

a in flexibility need little really think a kind when more you thing market I is good bit of this your product. with

be story to a good continues us. So for

Jay McCanless

more the consumer move was second level it buyer about up the it then think or driven first on, buyer was second kind focused you aspirational cancellation, was mostly and move if quarter, up? of group, then, or MDC this it driven So which cancellations, both entry

Robert Martin

kind I mean, was of same exactly. percentages, it almost think I the

David Mandarich

three, all okay. Across

Jay McCanless

and and the on have of missed homes Okay, you the impact year? right I the number I apologize, that rest Bob, for have and guys that now in at backlog commentary then your about might what of frame absorption

Robert Martin

we think had have XX% frame plus maybe the so of backlog you at complete comment we XX%. think year, I a least closer frame in to I look was, this year-ago, only

half start a point year. as us the gives starting better that back So the of we

of That's longer, we frame. through but fact trades back the of that are in end have counterpoint the think is, getting I the certainly ahead terms like been we taking difficult. game

Jay McCanless

questions. Thanks taking Okay, for great. my

Operator

Housing And question Alex from ahead. go Center. Barron next Research with our Please today comes

Alex Barron

hoping Yes, have quarter provide you the thanks, I was the guys. don't I quarters starts think I either. could of number and last in

to comparison then what the can going of a comps on for guys similar that Are related lot of are to close sales XX strategy. the they starts? that, builders sticking you days, to that there's your match saying XX another build-to-order for a So to future to thoughts question, and just in seem pace that to lot kind are demand of but be and

around So that. just thoughts your Thanks.

David Mandarich

what we is our David. is will cancellations. have, hey, we I we're start, to had have of knitting, to build order. going kind is, I we've stick we're going But to it some what Alex, said we think only

a We're going get approval, we're to to we to order And of And some a have give finished we get color don't houses. But which them. starts then build bunch so want and them stick cancellations, of we're a got you to sales, little of ahead we have build to our on to then we bit mandate. at. where we're mortgage not going going started. we're build Bob can we've as when But

Robert Martin

getting just numbers, comprehensively. so Yes, David the I to handle think, the to exact strategy pretty

what is we XXXX, QX for X,XXX So did. starts

gotten starting prior above the a still, that have of some X,XXX were lot kind we that started not sales levels. we are and sold note Now, roughly down in sold reasons but that now to periods the lower above that's is as were

So talking was not you're anticipate if QX of future. QX I'm prior-year that sure of about the QX, X,XXX but quarter, in the XXXX QX a was delta big wouldn't then I or X,XXX. and

Alex Barron

luck. lot, Best Okay, Thanks of a very helpful. guys.

Operator

our and back like final gentlemen, concludes to team management this ladies over session. conference the So remarks. I'd for to turn the question-and-answer

Robert Martin

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

Operator

concludes Thank presentation. thank you We call. This today's today's all you. conference for attending

disconnect have and your You lines may a now wonderful day.

M.D.C. (MDC) 28 Jul 222022 Q2 Earnings call transcript